Net Investment Income Tax Calculator

How the 3.8% Net Investment Income Tax works

The Net Investment Income Tax is a flat 3.8% federal surtax on certain investment income. It was created by Section 1411 of the Internal Revenue Code as part of the 2010 Affordable Care Act and first applied to tax year 2013. It sits separate from, and stacks on top of, ordinary income tax and capital gains tax.

The surtax applies to the smaller of two amounts: your net investment income for the year, or the amount your Modified Adjusted Gross Income (MAGI) exceeds the statutory threshold for your filing status. That "lesser of" rule means a small MAGI excess can cap a much larger investment gain, and a small investment gain can cap a much larger MAGI excess.

NIIT is reported on IRS Form 8960 and the result flows to Schedule 2 of Form 1040. The One Big Beautiful Bill Act (P.L. 119-21) did not repeal or modify NIIT, so the 3.8% rate and statutory thresholds carry into 2026 unchanged.

What counts as net investment income (and what doesn't)

Net investment income has clear boundaries. The following items are included:

• Taxable interest and dividends (including qualified dividends)
• Capital gains, both short-term and long-term, including gains on the taxable portion of a home sale above the Sec. 121 exclusion
• Rental and royalty income, unless you qualify as a real estate professional and materially participate
• Non-qualified annuity distributions
• Income from passive businesses and from trading in financial instruments or commodities

The following items are not investment income for NIIT:

• Wages and salary
• Self-employment income from an active trade or business
• Social Security benefits
• Distributions from qualified retirement plans (401(k), traditional IRA, Roth IRA, pension)
• Tax-exempt municipal bond interest

Before applying the 3.8% rate, you reduce gross investment income by allocable investment expenses such as investment interest expense and the portion of advisor fees attributable to taxable accounts.

MAGI thresholds by filing status

The 2026 thresholds are set by statute and are the same as every year since 2013:

The MFS threshold is exactly half of the MFJ threshold, and the Single and HoH thresholds are equal. These thresholds are not indexed for inflation, so more taxpayers cross them each year as wages and asset values rise. (The threshold for estates and trusts is indexed and sits at $16,000 for 2026.)

Common strategies to reduce NIIT exposure

Because NIIT depends on both MAGI and net investment income, planning usually attacks one or both. A few common approaches:

• Tax-loss harvesting: realize capital losses to offset gains and shrink net investment income.
• Asset location: hold income-producing assets (REITs, taxable bonds) inside tax-advantaged accounts where the income does not count as net investment income for NIIT.
• Roth conversions in lower-income years: the conversion itself raises MAGI, but pulling future income out of traditional accounts lowers MAGI in retirement, when investment income is more likely to be present.
• Charitable bunching and donor-advised funds: larger itemized deductions can reduce MAGI in the year you fund the gift.
• Installment sales: spreading a large gain over multiple years can keep MAGI under the threshold in any single year.
• Timing of large capital gains: realize them in years when MAGI is otherwise low, such as after retirement but before Social Security and required minimum distributions begin.

NIIT was not repealed by OBBBA, so 2026 planning still matters. Coordinate these moves with a qualified tax professional, because strategies that reduce NIIT can have side effects on other parts of your return.