NIIT Calculator
3.8% Net Investment Tax 2026

A 3.8% surtax under IRC §1411 on net investment income of higher-income taxpayers. Enacted by the Health Care and Education Reconciliation Act of 2010 as part of the Affordable Care Act, effective 1 January 2013. Often called the 'Medicare Surtax' or 'Obamacare investment tax' though it is technically not an additional Medicare tax — proceeds go to general revenue. The 3.8% rate applies to the LESSER of (a) net investment income for the year, or (b) the amount by which MAGI exceeds the filing-status threshold. Thresholds: $200,000 single/HoH, $250,000 married joint, $125,000 married separate. Thresholds are NOT indexed for inflation — they remain at the original 2013 levels.

IRC §1411(c) includes: (1) interest (taxable and tax-exempt for federal NIIT — but tax-exempt municipal bond interest is excluded), (2) dividends (qualified and ordinary), (3) capital gains (short-term and long-term, both included), (4) rental and royalty income (unless from an active business), (5) non-qualified annuity distributions, (6) passive activity income (income from businesses you don't materially participate in), (7) trading gains from certain passive trader businesses. NOT counted: wages, self-employment income, distributions from qualified retirement accounts (Traditional IRA, 401(k), Roth IRA), Social Security benefits, life insurance proceeds, alimony, active business income where you materially participate, municipal bond interest (tax-exempt for federal income tax purposes). The 'net' adjustment subtracts investment expenses, investment interest expense, and state/local taxes allocable to investment income.

Modified Adjusted Gross Income for NIIT is your regular AGI plus the foreign earned income exclusion (FEIE — IRC §911), minus deductions and adjustments related to the FEIE. For most domestic taxpayers, MAGI for NIIT = AGI. For US citizens/residents with foreign-source earned income who claim the FEIE, the foreign earned income excluded under §911 is ADDED BACK to AGI for NIIT MAGI calculation. The NIIT MAGI threshold of $200k single / $250k MFJ uses this measure. NIIT MAGI is similar to but distinct from the MAGI used for Roth IRA eligibility, ACA premium tax credits, and IRMAA — each calculation has slightly different add-backs.

Generally no, if the gain is within the §121 home sale exclusion ($250,000 single / $500,000 MFJ). The exclusion applies to BOTH regular capital gains tax AND NIIT — excluded gain is not net investment income. Gain above the exclusion is subject to long-term capital gains tax AND NIIT if MAGI exceeds the threshold. Example: married couple sells primary home for $900k gain after 25 years. First $500k is excluded; remaining $400k is taxed at LTCG rates (likely 15% or 20%) plus 3.8% NIIT on any portion above the $250k MFJ MAGI threshold. Vacation homes, rental properties, and investment properties get NO §121 exclusion — full gain is subject to capital gains plus NIIT.

No. IRC §1411(c)(5) excludes distributions from qualified retirement plans including Traditional 401(k), 403(b), 457(b), Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, and pension plans. However, distributions are still counted in MAGI for the threshold calculation — they can push your MAGI above $200k/$250k and cause OTHER investment income (dividends, gains from taxable accounts) to become subject to NIIT. Roth IRA distributions are also excluded from NIIT income, but qualified Roth distributions are also excluded from AGI/MAGI entirely. Roth conversions: the converted amount IS in MAGI but is NOT itself net investment income — so a large conversion can trigger NIIT on your separate dividend/gain income but not on the conversion itself.

(1) Determine net investment income (NII) — sum of dividends, interest, capital gains, rental income (passive), royalties, etc., minus allocable expenses. (2) Determine MAGI — AGI plus §911 FEIE add-back. (3) Calculate the excess of MAGI over your filing-status threshold. (4) NIIT = 3.8% × LESSER of NII or the MAGI excess. (5) Report on IRS Form 8960. Example: single filer with $80,000 wages + $30,000 qualified dividends + $50,000 long-term capital gain. AGI = MAGI = $160,000. NII = $80,000 ($30k + $50k). MAGI excess over $200k = $0 (below threshold). NIIT = $0. Same taxpayer with $250,000 wages: MAGI excess = $50,000. NIIT = 3.8% × lesser of ($80,000, $50,000) = 3.8% × $50,000 = $1,900.

Depends on whether the taxpayer materially participates. Income from a business in which you materially participate (active business income, under §469 material participation tests) is NOT net investment income. Passive partner/shareholder income (where you don't meet a §469 material participation test, e.g., 500+ hours/year, or substantially-all-the-work test) IS net investment income subject to NIIT. Real estate professionals under §469(c)(7) can convert rental income from passive to active and exempt it from NIIT. S-corp/LLC distributions of profits where you actively work are wages-equivalent and exempt; pure passive investors' shares ARE subject to NIIT on their share of investment income from within the entity.

No — interest from state and local government bonds that is exempt from federal income tax under IRC §103 is also exempt from NIIT under §1411(c)(1)(B). This makes municipal bonds particularly attractive for high-income investors above the NIIT thresholds: a high-MAGI taxpayer in the 37% bracket plus 3.8% NIIT effectively pays 40.8% on taxable interest but 0% on muni interest — a roughly 41% savings advantage on equivalent yield. Private activity bonds are still taxable for AMT purposes but exempt from NIIT. Out-of-state munis are taxable at the state level but federal-exempt and NIIT-exempt.

Yes. Capital losses reduce net investment income directly under IRC §1411(c)(1)(A)(iii). Tax-loss harvesting in taxable accounts reduces both regular capital gains tax AND NIIT on the harvested gain. After offsetting current-year capital gains, up to $3,000 of net losses can offset ordinary income (and similarly reduces NII via the netting calculation). The wash sale rule (§1091) — buying back the same or substantially identical security within 30 days — disallows the loss for regular tax AND NIIT. Carried-forward losses from prior years also reduce NII. Note: investment expenses and state tax allocable to investment income further reduce NII.

Not under current law. The $200k/$250k/$125k thresholds in IRC §1411(b) are STATIC — they have not changed since the tax took effect in 2013. By 2026, real-dollar bracket creep means a household with the same real income as a 2013 $200k earner is now well over the threshold due to ~33% cumulative inflation since 2013. Multiple Congressional proposals over the years have proposed indexing, but none have been enacted. The Treasury Department has no authority to index without Congressional action. As MAGI growth continues to outpace the static threshold, more households become subject to NIIT each year.