Net Investment Income Tax Rate Thresholds and Applicability

Quick answer: The Net Investment Income Tax (NIIT) is an additional 3.8% federal tax on investment income (like interest, dividends, and capital gains) that applies once your income passes certain thresholds. It's separate from — and in addition to — your regular income tax.

How it works: The NIIT is a 3.8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status.¹ In other words, it only hits the smaller of those two numbers — not your entire income or your entire investment income.

Thresholds by filing status: Married Filing Jointly or Qualifying Surviving Spouse: $250,000; Married Filing Separately: $125,000; Single or Head of Household: $200,000.²

So if your MAGI is below these amounts, you generally don't owe the NIIT at all, regardless of how much investment income you have.

What counts as investment income: IRS Publication 550 points to Form 8960 and its instructions for the full details on what's included, but it does clarify one nuance for retirement accounts: for purposes of the NIIT, net investment income doesn't include distributions from 401(a), 403(a), 403(b), or 457(b) plans, or IRAs.³ However, these distributions are taken into account when determining the modified AGI threshold.⁴ Distributions from other types of retirement plans, though, are included in net investment income.⁵

What it depends on:

• Your filing status (determines your threshold)
• Your MAGI for the year
• The amount and type of your investment income (interest, dividends, capital gains, rental income, etc., though some retirement account distributions are excluded as noted above)

A note on the documents: These figures come from Publication 550 (2025 edition) and confirmed by the same $250,000/$125,000/$200,000 thresholds appearing in Publication 505's 2026 estimated tax guidance, so this appears stable across both years. The NIIT itself is not something the One Big Beautiful Bill Act repealed based on what's in these documents, but if you have a complex mix of investment income types, it's worth double-checking current Form 8960 instructions.

Given the calculation requires netting your specific types of income against MAGI thresholds, it's worth having a CPA run the actual Form 8960 computation for your situation.