Investments · IRC §1411 · Form 8960
Net Investment Income Tax Calculator
The 3.8% surtax applies to the lesser of your net investment income or the amount your MAGI exceeds a threshold Congress fixed in 2013 and has never indexed. See which limb binds your result, and how much headroom you have left.
How much Net Investment Income Tax will I owe?
You owe $1,824 of Net Investment Income Tax: 3.8% of $48,000, the lesser of your $48,000 of net investment income and the $50,000 by which your MAGI exceeds the $250,000 threshold for your filing status.
- Flat 3.8% rate, stacked on top of ordinary or capital gains tax
- Thresholds: $200,000 single / $250,000 joint / $125,000 MFS
- Thresholds are statutory and NOT indexed for inflation
- Wages are not investment income but do raise MAGI
- Retirement plan distributions are excluded from NII but raise MAGI
- Nonresident aliens don't owe NIIT; dual-status filers owe it only for the resident part of the year, with the full threshold
Filing status & MAGI
Nonresident aliens don't owe NIIT (IRC §1411(e)). A U.S. citizen or resident married to a nonresident alien is treated as married filing separately for NIIT unless they file jointly and also make the NIIT joint-return election.
Investment income
Result
Net Investment Income Tax (Form 8960)
$1,824
3.8% of $48,000
Limited by your investment income. All of it is exposed; trimming MAGI will not help until it approaches the threshold.
What the result means
- Your tax is limited by your net investment income — your MAGI is far enough above the threshold that all of your investment income is exposed. Reducing MAGI alone will not help until it drops close to the threshold; reducing investment income will.
- The $200,000 / $250,000 / $125,000 thresholds are set by statute and are not adjusted for inflation. They are the same in 2026 as they were in 2013, which is why a growing share of households owes this tax each year.
- Wages and self-employment income are not net investment income, but they do count toward MAGI — they can push you over the threshold and expose investment income you already had.
What is not net investment income
Most surprise NIIT bills come from misreading this list. Several of these items are excluded from investment income but still raise MAGI, which is how they end up causing the tax anyway.
| Income type | Why it is excluded |
|---|---|
| Wages and self-employment income | Earned income is outside § 1411(c) — it is already subject to FICA or SE tax, and the Additional Medicare Tax handles the high-earner surcharge on it. |
| Tax-exempt municipal bond interest | Excluded from gross income under § 103, so it never enters net investment income or MAGI. |
| Qualified retirement plan and IRA distributions | § 1411(c)(5) excludes distributions from 401(k), 403(b), 457(b), IRA and similar plans from NII — though the distribution still raises MAGI and can expose other investment income. |
| Gain excluded on the sale of a principal residence | The § 121 exclusion (up to $250,000 / $500,000) is removed from gross income first. Only gain above the exclusion is net investment income. |
| Income from a non-passive trade or business | Business income in which you materially participate is not NII, unless the business trades in financial instruments or commodities. |
| Social Security benefits | Taxable Social Security is not investment income, but it does increase MAGI. |
Frequently asked questions
- What is the Net Investment Income Tax?
- A flat 3.8% tax under IRC §1411 on the lesser of your net investment income or the amount your modified adjusted gross income exceeds $200,000 (single), $250,000 (married filing jointly) or $125,000 (married filing separately). It is reported on Form 8960 and is separate from capital gains tax — a long-term gain can be taxed at 20% plus 3.8%.
- Are the NIIT thresholds adjusted for inflation?
- No. The $200,000 / $250,000 / $125,000 thresholds are fixed in the statute and have not changed since the tax took effect in 2013. They are the same for 2026. Because wages and asset values rise while the threshold does not, the tax reaches more households every year — bracket creep with no correction mechanism.
- Do 401(k) or IRA withdrawals trigger the 3.8% tax?
- Distributions from qualified plans and IRAs are excluded from net investment income by §1411(c)(5), so the distribution itself is not taxed at 3.8%. But it does increase your MAGI, which can push you over the threshold and expose interest, dividends and capital gains you already had.
- Does selling my home trigger NIIT?
- Only the gain above the §121 exclusion. If you exclude $250,000 (single) or $500,000 (joint) of gain, that excluded amount is neither investment income nor MAGI. Gain beyond the exclusion is net investment income and also inflates MAGI in the year of sale, which is why large home sales frequently produce a one-year NIIT bill.
- Do wages count toward the Net Investment Income Tax?
- Wages are not net investment income, but they do count toward MAGI. High wages can therefore put you over the threshold and expose modest investment income to the 3.8% tax. Wages and self-employment income above $250,000 (joint), $125,000 (married filing separately) or $200,000 (everyone else, including a qualifying surviving spouse) are separately hit by the 0.9% Additional Medicare Tax on Form 8959. That threshold is tested against wages and SE income, not MAGI.
Where the 3.8% shows up
Related Tools & Guides
Sources & References
Primary references used for this content
26 U.S.C. §1411 — Imposition of tax
The 3.8% rate, the lesser-of test, and the unindexed thresholds
View on law.cornell.edu
Net Investment Income Tax
IRS summary of who owes the tax and on what
View on irs.gov
About Form 8960, Net Investment Income Tax
The form and instructions this calculator mirrors
View on irs.gov
Questions and Answers on the Net Investment Income Tax
Treatment of home sales, rentals, and retirement distributions
View on irs.gov
✓4 primary sources; links re-checked on a weekly rotation by the source watcher
Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.