NIIT 3.8% Net Investment Income Tax Calculator
NIIT is a 3.8% federal surtax on investment income for high earners — $200K single, $250K MFJ, $125K MFS thresholds. It applies to lesser of net investment income OR excess MAGI above threshold. This calculator handles Form 8960 calculation.
What Counts As Net Investment Income
NII includes interest, dividends, capital gains, rental and royalty income, and income from passive business activities. Excludes wages, self-employment income, distributions from qualified retirement plans, and gains on sale of active business interests.
How The Threshold Works
NIIT applies to the LESSER of: (a) net investment income, or (b) MAGI minus threshold. So a high-income earner with low NII pays NIIT on the full NII. A low-income earner with high NII (above threshold) pays on only the excess MAGI. This caps NIIT for high-income/low-investment earners.
Reducing NIIT Exposure
Three highest-leverage moves: defer income to drop MAGI under threshold (Roth conversion timing, capital gain timing), tax-loss harvesting to reduce net gains, and tax-exempt municipal bonds for interest (not subject to NIIT). Maximising 401k/HSA deferrals also lowers MAGI.
NIIT 3.8% Rate Since 2013: Why Millions More Americans Pay It in 2026
Per the IRS Net Investment Income Tax topic page, the 3.8% rate and $200K/$250K thresholds were set by Affordable Care Act Section 1411 in 2013 and have NEVER been indexed to inflation. This is the single biggest reason the tax hits more households every year — cumulative CPI-U inflation from 2013 to 2026 is roughly 38%, so what was a "high-earner" tax on the top 2% now reaches middle-upper professionals in coastal metros. A dual-income couple earning $130K each in 2013 was safely below $250K MFJ; the same couple with 2026 wage growth to $180K each ($360K MAGI) is now $110K into NIIT territory. Every extra $1,000 of investment income above threshold costs $38 in federal NIIT on top of the 15-20% long-term capital gains rate — an effective bracket most middle-class investors don't realize applies to them until they file Form 8960. Time capital gains carefully across tax years to avoid crossing the threshold in a single year.
Source: IRC §1411 Net Investment Income Tax; IRS Form 8960 Instructions. Last updated: July 2026.