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Net Investment Income Tax (NIIT)

Also called: NIIT, 3.8% surtax

Definition: The net investment income tax is a 3.8% federal surtax on investment income such as dividends, interest and capital gains for people whose modified AGI exceeds $200,000 or $250,000 (joint).

Updated November 12, 2026 · How we check facts

IRS Topic 559 lists interest, dividends, certain annuities, royalties, rents and capital gains among the income that counts. The tax is charged in addition to regular income tax.

Formula

NIIT = 3.8% × min(net investment income, MAGI − threshold)
  • MAGI: modified adjusted gross income.
  • Threshold: $200,000 single or head of household, $250,000 married filing jointly, $125,000 married filing separately.

If MAGI is below the threshold, NIIT is zero. These thresholds are written into the law and have not been adjusted for inflation.

Example

A single filer has MAGI of $230,000, including $20,000 of dividends. The excess over the threshold is $30,000. The smaller of $20,000 and $30,000 is $20,000, so NIIT = 3.8% × $20,000 = $760.

With MAGI of $210,000 and the same dividends, the excess is only $10,000, so NIIT = 3.8% × $10,000 = $380.

The capital gains calculator adds NIIT to its estimate, and how are dividends taxed shows how it combines with the 0/15/20% rates.

Calculate it

Free toolCapital Gains CalculatorFederal tax on a sale, with 2026 long-term brackets.Free toolDividend CalculatorProject dividend income with or without reinvesting.

Guides that explain it

Related terms

Qualified DividendA qualified dividend is an ordinary dividend that meets IRS conditions, including a holding period, and is therefore taxed at the 0%, 15% or 20% long-term capital gains rates.Modified Adjusted Gross Income (MAGI)Modified adjusted gross income (MAGI) is adjusted gross income with certain deductions and exclusions added back; the IRS uses it to test eligibility for Roth IRAs, credits and deductions.Marginal Tax RateThe marginal tax rate is the rate applied to the next dollar of taxable income; in a progressive system, each rate applies only to the income inside its own bracket.401(k)A 401(k) is an employer-sponsored retirement savings plan in which employees contribute part of their pay, often with employer matching, up to annual limits set by the IRS.Annual Percentage Rate (APR)Annual percentage rate (APR) is the cost of credit expressed as a yearly rate; for many loans it combines the interest rate with certain fees charged when the loan is made.Annual Percentage Yield (APY)Annual percentage yield (APY) is the total interest a deposit account pays over a 365-day period, expressed as a percentage that includes the effect of compounding.Capital Gain DistributionA capital gain distribution is a payout from a mutual fund or REIT of gains the fund realized; it is taxed as a long-term capital gain no matter how long you held the fund.Catch-Up ContributionA catch-up contribution is an extra amount that people age 50 or older may add to a 401(k) or similar retirement plan above the normal annual limit, if the plan permits it.

Sources

  1. IRS — Topic no. 559, Net investment income tax