Net Investment Income Tax (NIIT)

Tax Planning
Updated Apr 2026

A 3.8% federal surtax on net investment income for high-income taxpayers above IRS thresholds.

Tax laws change annually and vary by country. The information on this page is for educational purposes only. Always verify figures with current official sources (IRS, HMRC, CRA, ATO) and consult a qualified tax professional before making any tax-related decision.

What is NIIT?

The net investment income tax (NIIT) is a 3.8% surtax under IRC Section 1411 applied to the lesser of a taxpayer's net investment income or the amount by which their modified adjusted gross income (MAGI) exceeds a threshold: $200,000 for single filers and $250,000 for married filing jointly (not inflation-indexed). Net investment income includes interest, dividends, capital gains, rental income, passive business income, and annuities. Active wages and business income are excluded. The NIIT was enacted as part of the Affordable Care Act to help fund Medicare expansion.

Example

Example

A single filer has MAGI of $260,000, of which $80,000 is net investment income. The NIIT applies to the lesser of $80,000 (NII) or $60,000 (MAGI above the $200,000 threshold). The 3.8% surtax on $60,000 equals $2,280 in additional federal tax for the year.

Source: IRS — Questions and Answers on the Net Investment Income Tax

Sources
  1. IRS — Net Investment Income Tax
  2. Investopedia — Net Investment Income Tax