Net Investment Income Tax: Will the 3.8% Surtax Apply to You?
Beyond ordinary federal income tax, higher earners with significant interest, dividends, or capital gains may owe an extra 3.8% Net Investment Income Tax (NIIT). Enacted to help fund the Affordable Care Act, the NIIT kicks in once your modified adjusted gross income (MAGI) crosses a set threshold โ $200,000 for single filers and $250,000 for married couples filing jointly. Below that threshold, none of your investment income is subject to the surtax, no matter how large it is.
This calculator applies the same rule the IRS uses: the NIIT is charged on whichever is smaller โ your total net investment income, or the amount by which your MAGI exceeds the threshold for your filing status. Enter your MAGI, your net investment income (interest, dividends, capital gains, rental income, and similar), and pick your filing status, and the calculator works out the taxable NIIT base and the resulting 3.8% surtax. This structure means that even high earners with modest investment income may owe very little NIIT, while investors with large investment portfolios near the threshold can see nearly all of that income taxed at the extra rate.
This is a simplified estimate based on the core NIIT rule and doesn't account for every MAGI adjustment or edge case in your specific tax situation. For an exact figure, use IRS Form 8960 or consult a tax professional, especially if your income is close to the threshold.
Frequently Asked Questions
The NIIT is a 3.8% federal surtax on net investment income โ interest, dividends, capital gains, rental income, and similar โ for taxpayers whose modified adjusted gross income (MAGI) exceeds a set threshold.
It applies once your MAGI exceeds $200,000 (single filers) or $250,000 (married filing jointly). The tax is charged on the smaller of your net investment income or the amount your MAGI exceeds the threshold.
Interest, dividends, capital gains, rental and royalty income, and non-qualified annuity income generally count. Wages, self-employment income, and distributions from qualified retirement plans are generally excluded.