Phase 1 · Core Sovereign Layer
Net Investment Income Tax Calculator
The 3.8% surtax that turns a 15% capital-gains rate into 18.8%. See whether you cross the threshold, which of the two tests binds, and what your next dollar of income really costs.
Do I owe the 3.8% net investment income tax?
Only if your modified AGI exceeds the threshold — $200,000 single, $250,000 married filing jointly. The tax is 3.8% of the lesser of your net investment income or the amount MAGI sits above that line. Whichever is smaller caps the tax, so a big portfolio just over the threshold may owe very little.
- Worked example (defaults on this page): a single filer with $40,000 of net investment income and $230,000 of MAGI is $30,000 over the threshold — the smaller number — so NIIT applies to $30,000 and costs $1,140.
- This stacks on capital-gains tax: a long-term gain taxed at 15% actually costs 18.8%, and one at 20% costs 23.8% once NIIT applies.
- Wages, self-employment income and IRA or 401(k) withdrawals are not investment income — but they do raise MAGI, so they can pull investment income you already had into the surtax.
- The thresholds are fixed in statute since 2013 with no inflation adjustment, so the surtax reaches further down the income scale every year.
Under the hood
The math, fully exposed
One rate, applied to whichever of two numbers is smaller:
MAGI excess = max(0, MAGI − threshold)
Taxable base = min(net investment income, MAGI excess)
NIIT = 3.8% × taxable base
All-in gains rate = capital-gains rate + 3.8% (once the surtax applies)
Thresholds — fixed in statute since 2013, never indexed
| Filing status | MAGI threshold | Rate above it | Inflation-indexed? |
|---|---|---|---|
| Single | $200,000 | 3.8% | No — unchanged since 2013 |
| Married filing jointly | $250,000 | 3.8% | No — unchanged since 2013 |
| Head of household | $200,000 | 3.8% | No — unchanged since 2013 |
What counts as net investment income
| Included | Excluded |
|---|---|
| Interest and dividends | Wages and self-employment income |
| Capital gains | IRA and 401(k) distributions |
| Rental and royalty income | Social Security benefits |
| Non-qualified annuities | Tax-exempt municipal interest |
| Passive business income | Income from a business you actively run |
- The excluded column still matters. Wages and IRA withdrawals are not investment income, but they raise MAGI — so they can drag investment income you already had into the surtax.
- Married filing separately uses a $125,000 threshold, which is not shown above because it rarely pays without a specific reason.
- NIIT shares its thresholds with the Additional Medicare surtax (0.9% on wages and self-employment income), so high earners frequently cross both lines in the same year.
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Answers
Frequently asked questions
What is the Net Investment Income Tax?
A 3.8% surtax under IRC §1411, added in 2013 to help fund the Affordable Care Act. It applies to the lesser of your net investment income or the amount your modified AGI exceeds a fixed threshold — $200,000 for single filers, $250,000 married filing jointly. It sits on top of ordinary income tax and capital-gains tax, which is why a "15% capital gains rate" is often really 18.8%.
What counts as net investment income?
Interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses you do not materially participate in. What does not count: wages, self-employment income, Social Security benefits, distributions from IRAs and 401(k)s, tax-exempt municipal interest, and income from a business you actively run. Net investment income is measured after allocable expenses — investment interest, advisory fees, state tax attributable to it.
Why do I owe NIIT when my investment income is small?
Because the tax is on the lesser of two numbers, and either can be the binding one. If your MAGI is only slightly over the threshold, that excess caps the tax even when your investment income is large. The reverse trap is subtler: wages, an IRA withdrawal or a Roth conversion are not investment income themselves, but they raise MAGI — which can pull investment income you already had into the surtax.
Are the NIIT thresholds adjusted for inflation?
No. The $200,000 and $250,000 figures have been fixed in statute since the tax took effect in 2013 and contain no inflation adjustment. Ordinary brackets rise every year while these do not, so the surtax reaches steadily further down the income scale — the same design as the Additional Medicare surtax, which shares the same thresholds.
How can I reduce NIIT?
Either side of the "lesser of" test is a lever. Lower net investment income by harvesting losses, holding growth assets rather than income-throwing ones in taxable accounts, or shifting income-producing assets into tax-advantaged accounts. Lower MAGI with pre-tax retirement contributions or by spreading a large realisation across tax years. Municipal-bond interest is excluded from both. This is an educational model — confirm your position with a tax professional.