Federal Net Investment Income Tax (NIIT) Calculator

How this calculator works

The Net Investment Income Tax under IRC § 1411 is a 3.8% federal surtax that applies on top of regular federal income tax, including the long-term capital gains rate. It was enacted as part of the Health Care and Education Reconciliation Act of 2010 (the companion bill to the Affordable Care Act) and took effect January 1, 2013. The tax is the investment-income counterpart of the 0.9% Additional Medicare Tax that applies to wages and self-employment income above the same thresholds — together, the two surtaxes ensure that high-income filers face an additional 0.9%-or-3.8% layer on top of the regular federal rate, with the rate depending on whether the income came from labor or capital.

The mechanic that surprises almost every filer the first time they encounter it is the lesser-of rule. Under § 1411(a)(1), NIIT is computed on the smaller of two numbers: net investment income for the year, OR modified adjusted gross income (MAGI) in excess of the filing-status threshold. Either floor can control, and which one controls dramatically changes what planning move actually reduces the surtax.

The thresholds — and why they keep capturing more filers

IRC § 1411(b)(1) sets the thresholds as fixed dollar amounts. They have NOT been adjusted for inflation since enactment, which means they capture more filers every year through bracket creep:

| Filing status | Threshold | | ---------------------------------------------- | -------------- | | Married filing jointly / qualifying spouse | $250,000 | | Single / head of household | $200,000 | | Married filing separately | $125,000 | | Estates and non-grantor trusts (§ 1411(a)(2)) | ~$15,700 |

The estate/trust threshold DOES inflation-adjust, because it cross-references the top income-tax bracket entry point for estates and trusts (which is inflation-adjusted under separate provisions). The individual thresholds do not — a deliberate revenue-raising choice in 2010 that quietly increases the effective tax rate every year. A married couple earning $200,000 jointly in 2013 was $50,000 below the threshold; the same couple earning $250,000 in 2026 (essentially flat in real terms after a decade of inflation) is now at the threshold and starting to pay NIIT on their investment income.

The "lesser of" rule, with three worked examples

Example 1 — MAGI floor controls (small investment income)

A married couple files jointly with $300,000 MAGI for the year. They have $40,000 of investment income (a mix of dividends and capital gains in a taxable brokerage account). They are over the $250,000 MFJ threshold by $50,000.

• MAGI excess: $50,000
• Net investment income: $40,000
• NIIT base (lesser of): $40,000
• NIIT owed: $40,000 × 3.8% = $1,520

Here, net investment income is the smaller number, so it controls. Every additional dollar of investment income costs this couple 3.8 cents at the margin (up to the point where NII catches up to the $50,000 MAGI excess). Additional non-investment income — wages, a bonus, self-employment — does NOT increase NIIT until investment income catches up.

Example 2 — NII floor controls (large investment income)

The same couple, but this year they sell a rental property for a large capital gain. Their MAGI for the year is $400,000 (still MFJ), and their net investment income (after deducting allocable investment interest and SALT) is $200,000.

• MAGI excess: $150,000
• Net investment income: $200,000
• NIIT base (lesser of): $150,000
• NIIT owed: $150,000 × 3.8% = $5,700

Here, the MAGI-excess floor is the smaller number, so it controls. Additional investment-income dollars produce no incremental NIIT (until MAGI excess catches up). The planning move that actually reduces NIIT here is reducing MAGI — through HSA contributions, traditional 401(k) deferrals, or other above-the-line adjustments — not through tax-loss harvesting.

Example 3 — below threshold

A single retiree has $190,000 MAGI for the year (mostly Social Security plus IRA distributions). She has $30,000 of dividend and interest income on her taxable brokerage account.

• MAGI excess: $0 (MAGI is below the $200,000 single threshold)
• Net investment income: $30,000
• NIIT base (lesser of): $0
• NIIT owed: $0

No NIIT is owed regardless of how much investment income she earned. The MAGI floor controls — she is below the threshold, so the surtax simply does not apply. This is the most common filer posture across the US population: above zero investment income, below the MAGI threshold, NIIT is irrelevant.

The stack: LTCG + NIIT + state

For high-income filers, NIIT does not stand alone — it stacks on top of the long-term capital gains rate under IRC § 1(h) and any state-level capital gains tax. The maximum federal effective rate on a long-term capital gain is therefore:

• 20% LTCG (top bracket under § 1(h))
• 3.8% NIIT
• = 23.8% federal

For a California-domiciled investor, add 13.3% state capital gains tax (taxed as ordinary income, with an additional 1% mental-health-services tax on income over $1M) — total roughly 37%. For a New York City resident, add 10.9% New York State plus a New York City surtax — total roughly 38%. For a Florida-domiciled investor, the state layer is $0 (Florida Constitution Art. VII § 5 prohibits a state personal income tax), so the federal 23.8% is the entire bill. The domicile question is one of the largest after-tax-return levers in high-net-worth planning.

What's in NII — and what's not

Investment income includes:

• Interest, dividends, annuities
• Royalties and rents — unless from a trade or business in which the taxpayer materially participates
• Net capital gains, including the post-§ 121 portion of a primary-residence sale
• Income from passive trade-or-business activities under IRC § 469
• Income from a trade or business of trading in financial instruments

Investment income excludes:

• Wages and self-employment income (covered by FICA/SECA and the 0.9% Additional Medicare Tax)
• Income from an active trade or business in which the taxpayer materially participates under § 469(h)
• Distributions from qualified retirement plans (IRC § 1411(c)(5)) — traditional IRAs, Roth IRAs, 401(k), 403(b), pensions
• Tax-exempt municipal-bond interest (already excluded from gross income)
• Operating income from rental real estate where the taxpayer qualifies as a "real estate professional" under IRC § 469(c)(7)

The real estate professional exception

The single largest carve-out from NIIT for active real-estate investors is the § 469(c)(7) "real estate professional" exception. A taxpayer who (1) spends more than 750 hours per year in real-property trades or businesses AND (2) more than half of their total personal-services time is in real-property trades AND (3) materially participates in each rental activity can treat their rental income as non-passive trade-or-business income, which is excluded from NIIT entirely. No proration, no partial relief — either you qualify and the income is out, or you don't and it's all in.

The qualification is fact-intensive and a frequent IRS audit target. Taxpayers who claim the exception without contemporaneous time logs lose on audit with regularity. Married couples can have one spouse qualify based on that spouse's hours alone; the other spouse's involvement does not count for the 750-hour test but does count for the material-participation test on specific activities.

Primary residence sale: where § 121 meets § 1411

Gain on the sale of a primary residence that qualifies under IRC § 121 is excluded from gross income up to the $250,000 single / $500,000 MFJ cap. Excluded gain is therefore NOT in MAGI and NOT in net investment income — meaning a typical Florida MFJ sale of an appreciated primary residence with a $400,000 gain produces $0 NIIT (the full gain is excluded under § 121, leaving no investment income to surtax).

Gain ABOVE the § 121 cap, or gain on a sale that does not meet the 2-of-5 ownership and use tests, is investment income subject to NIIT. A single Florida seller with a $400,000 primary-residence gain on a qualifying sale excludes $250,000 and treats the remaining $150,000 as NIIT-able — if MAGI is above the $200,000 single threshold, NIIT on that $150,000 is $5,700. The companion Florida Primary Residence Capital Gains Calculator models this stack end-to-end, including depreciation recapture under § 121(d)(6) and partial-exclusion proration under Treas. Reg. § 1.121-3.

Harvesting strategies that actually reduce NIIT

Which strategy works depends on which floor is binding:

• When the NII floor binds (NII < MAGI excess), reduce NII directly: tax-loss harvesting (offset capital gains with realized losses), charitable contributions of appreciated securities (gift the unrealized gain to a donor-advised fund or charity to skip both the LTCG and NIIT layers), opportunity zone investments (defer capital gains under IRC § 1400Z-2), § 1031 like-kind exchanges (defer real-estate investment gain), installment sales (spread gain across multiple years), and timing gain realization to alternate high-income and low-income years. Investment interest expense and SALT allocable to investment income also reduce NII directly.

• When the MAGI-excess floor binds (NII > MAGI excess), reduce MAGI: HSA contributions, traditional 401(k) and IRA contributions where deductible, QBI deduction strategies, and other above-the-line adjustments drop the NIIT base 1-for-1 until NII catches up. Investment harvesting has no incremental NIIT impact in this posture — though it may still be valuable for income-tax-rate reasons.

The calculator's "what's binding" indicator tells you which bucket your fact pattern falls into.

Common errors

• Confusing MAGI with AGI or taxable income. MAGI is AGI plus a small set of add-backs (primarily the IRC § 911 foreign earned income exclusion and certain CFC income). For most domestic filers, MAGI equals AGI — but it is NOT taxable income (which is after itemized or standard deduction). Pulling the wrong number off Form 1040 is the single most common Form 8960 error.

• Miscounting the filing-status threshold. The MFS threshold is $125,000, not $250,000 — half of the MFJ figure, which catches couples who file separately for unrelated reasons. The estate/trust threshold is small (~$15,700 for 2026), so most estates with any retained investment income owe NIIT on it.

• Treating rental income as automatically excluded because the taxpayer "manages" it part-time. Active management is not the standard — material participation under one of the seven Treas. Reg. § 1.469-5T(a) tests is, and the § 469(c)(7) real-estate-professional carve-out also requires 750 hours and the half-of-personal-services-time test. Without those, rental income is passive and NIIT-able.

• Forgetting the inflation-adjustment gap. Filers who first encountered the thresholds in 2013 sometimes mentally peg them where they were a decade ago and miss that wage and portfolio growth has pushed them across. A married couple earning $240,000 in 2024 and $260,000 in 2025 has just transitioned from no-NIIT to NIIT — without any change in their economic posture relative to inflation.

How this page is maintained

The IRC § 1411 framework has been stable since 2013, with the Treasury Regulations (Treas. Reg. § 1.1411-1 through § 1.1411-10) finalized in late 2013 and refined through 2014. The thresholds are statutorily fixed and have not been adjusted since enactment. The estate/trust threshold tracks the IRS annual inflation-adjustment release (Rev. Proc.) for the top income-tax bracket for estates and trusts and is refreshed annually with that release. We monitor IRS guidance on Form 8960 instructions, material-participation rules, and real-estate-professional qualification and update the FAQ as positions evolve.

Last reviewed: 2026-05-15 against IRC § 1411 (a), (b)(1), (a)(2), (c); Treas. Reg. § 1.1411-1 through § 1.1411-10; IRS Form 8960 + instructions; IRC § 469; IRC § 469(c)(7); IRC § 163(d).