Net Investment Income Tax Calculator
Apply the 3.8% NIIT to the lesser of your net investment income and the amount your MAGI sits above the IRS threshold.
What it does
The net investment income tax is a 3.8% surtax that arrives on top of regular income tax. It targets interest, dividends, capital gains, rent, royalties, and other passive income once total income crosses a fixed threshold.
The rule has two moving parts, and the smaller one wins. The first is net investment income itself. The second is how far modified adjusted gross income sits above the filing threshold: $250,000 for married filing jointly, $200,000 for single filers, or $125,000 for married filing separately.
Whichever number is smaller gets multiplied by 3.8%. A household with $50,000 of investment income and MAGI $50,000 above the threshold taxes all $50,000. The same household with only $10,000 of MAGI over the threshold taxes $10,000.
These thresholds do not move with inflation, so over time more households cross them. Regular wages are not net investment income, but they still push MAGI up, which is how a raise can make existing investment income newly taxable.
This page applies the two-part rule, shows a worked example for each wedge of income, and answers the boundary questions people ask most.
How to use
- Pick your filing status; each one has its own threshold.
- Enter modified adjusted gross income, the figure near the bottom of the return plus foreign adjustments.
- Enter net investment income: interest, dividends, capital gains, rents, royalties, and passive business income.
- Read how far MAGI sits above the threshold.
- The tool taxes whichever is smaller, your investment income or that excess.
- Add the 3.8% result to regular tax; state taxes may also apply.
Formula
- NII
- Net investment income: interest, dividends, capital gains, rents, royalties, and passive income.
- MAGI
- Modified adjusted gross income, the income measure the thresholds apply to.
- Threshold
- $250,000 jointly, $200,000 single, $125,000 married filing separately.
The min rule is why the tax is often smaller than 3.8% of total investment income. Once MAGI is under the threshold, the tax is zero no matter how much investment income exists. The thresholds come from section 1411 of the tax code and are not indexed for inflation, so they stay at the same dollar figures year after year.
Worked example
Example: married filing jointly, $300,000 income
MAGI $300,000 and investment income $50,000 (defaults).
- Threshold for married filing jointly: $250,000.
- MAGI over the threshold: 300,000 - 250,000 = $50,000.
- Lesser of $50,000 investment income and $50,000 excess: $50,000.
- Tax: 50,000 x 3.8% = $1,900.
- Regular income tax still applies to the same income on top of this surtax.
Reference table
| Filing status | MAGI threshold |
|---|---|
| Married filing jointly | $250,000 |
| Single or head of household | $200,000 |
| Married filing separately | $125,000 |
| Rate on the lesser amount | 3.8% |
| Inflation adjustment | None |
Limits
- A single-year estimate. Income timing, loss carryovers, and credits can shift the final figures.
- Net investment income has special rules for rental income, trading, and passive activity losses.
- The 3.8% applies on top of regular capital gains rates, not instead of them.
- State taxes are separate; some states add their own surtaxes on investment income.
Common mistakes
- Applying 3.8% to all investment income without checking the MAGI excess.
- Counting wages, Social Security, or IRA distributions as net investment income.
- Using taxable income instead of MAGI, which sits higher for many filers.
- Assuming the thresholds rise with inflation; they are fixed in the statute.
- Forgetting that selling a home or fund can push MAGI across the threshold and make other investment income taxable.
Try it yourself
Quick checks. Answers sit tucked under each question.
Single filer, MAGI $300,000, investment income $40,000?
Excess is $100,000; the lesser is $40,000; tax is $1,520.
Married filing jointly, MAGI $260,000, investment income $80,000?
Excess is $10,000; the lesser is $10,000; tax is $380.
Single filer, MAGI $180,000, investment income $30,000?
MAGI is under the threshold, so the tax is $0.
Questions
What counts as net investment income?
Interest, dividends, capital gains, rents, royalties, and income from passive activities, less related expenses. Retirement account distributions and wages generally do not count.
Why does the tax use the smaller of two amounts?
The statute pairs the 3.8% with the lower of investment income and the amount above the threshold, so the tax never exceeds either the income itself or the portion of total income that triggered the surtax.
Do the thresholds change each year?
No. The $250,000, $200,000, and $125,000 figures are written into the law without an inflation adjustment, unlike brackets and deductions.
Does it replace capital gains tax?
No. Capital gains keep their own rates, and the 3.8% rides on top when the thresholds are crossed.
Can I owe it with no wages?
Yes. A retired investor can owe it on interest, dividends, and gains once MAGI crosses the threshold, even with no earned income.
Is the 3.8% taken from my paycheck?
No. It is usually settled when the return is filed, which is why estimated payments matter for people with large investment income.
Sources
- IRS: topic 559, net investment income tax thresholds and computation
- 26 USC 1411: imposition of tax on net investment income