Net Investment Income Tax (NIIT)
A 3.8 percent additional federal tax on net investment income for taxpayers with modified adjusted gross income above statutory thresholds.
Detailed Explanation
Enacted in 2013, the NIIT applies to the lesser of net investment income or modified AGI in excess of $200,000 (single) or $250,000 (married filing jointly). Net investment income includes interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and passive business income. Wages, self-employment income, and active business income are excluded. Reported on Form 8960. The NIIT stacks on top of regular tax and capital gains tax, creating effective long-term capital gains rates of 18.8 to 23.8 percent for high-income households.
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Learn about Tax Planning & StrategyRelated Terms
Capital Gain
The profit realized from the sale of a capital asset such as stock, real estate, or cryptocurrency, taxed at preferential rates if held longer than one year.
Tax Bracket
A range of taxable income subject to a specific marginal tax rate under the federal progressive income tax system.
Adjusted Gross Income (AGI)
Adjusted Gross Income is your total gross income reduced by specific above-the-line deductions, used as the starting point for calculating your federal taxable income.
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