The Net Investment Income Tax (NIIT) is a 3.8% surtax on investment income — interest, dividends, capital gains, rental income, and royalties — for high-income taxpayers. It applies when your Modified Adjusted Gross Income (MAGI) exceeds $200,000 (single) or $250,000 (married filing jointly). The tax applies to the lesser of your net investment income or the excess of your MAGI over the threshold, so understanding both numbers is critical.
Income Details
Total MAGI including all investment income below
Net Investment Income Breakdown
NIIT Breakdown
Strategies to Reduce NIIT
- Maximize pre-tax 401(k)/IRA contributions to reduce MAGI
- Invest in tax-exempt municipal bonds (interest excluded from NII)
- Harvest capital losses to offset capital gains
- Hold investments in tax-deferred accounts (IRA, 401k)
- Convert passive rental activities to active participation
- Defer capital gains into Qualified Opportunity Zone funds
Disclaimer: This is an estimate based on 2025 NIIT rules (IRC §1411). It does not account for all allowable deductions against NII or complex MAGI adjustments. Always consult a tax professional before making decisions.
How to Use the Net Investment Income Tax Calculator
The Net Investment Income Tax (NIIT), sometimes called the Medicare surtax, is a 3.8% federal tax on investment income for high earners. Enacted under IRC §1411 as part of the Affordable Care Act, it applies when your Modified Adjusted Gross Income (MAGI) exceeds $200,000 for single filers or $250,000 for married filing jointly. This calculator estimates your 2025 NIIT liability so you can plan ahead.
Step 1: Select Your Filing Status and Enter MAGI
Choose your tax filing status, then enter your total Modified Adjusted Gross Income. MAGI for NIIT purposes is generally your regular AGI plus any foreign earned income exclusion. Include all income sources — wages, business income, retirement distributions, and investment income — in your MAGI figure. The NIIT threshold is $200,000 for single filers and head of household, $250,000 for married filing jointly, and $125,000 for married filing separately.
Step 2: Break Down Your Investment Income
Enter each category of investment income separately. Interest income includes savings accounts, CDs, and bond interest (not tax-exempt municipal bond interest). Dividends include both qualified and non-qualified dividends. Net capital gains are your total gains minus losses. Passive rental income is net profit from rental properties where you don't materially participate. Royalties and other passive income from partnerships or S-corporations also count.
How the NIIT Amount Is Calculated
The NIIT applies to the lesser of your total net investment income (NII) or the amount by which your MAGI exceeds the threshold. For example, if your MAGI is $230,000 (single filer) — exceeding the $200,000 threshold by $30,000 — and your NII is $50,000, the NIIT applies to the lesser amount: $30,000. Your NIIT would be $30,000 × 3.8% = $1,140. If your NII were only $20,000, the NIIT would apply to $20,000 (the lesser), for a tax of $760.
Strategies to Reduce Your NIIT
The most effective NIIT reduction strategies target either reducing MAGI or reducing net investment income. Maximizing pre-tax retirement contributions (401(k), traditional IRA) reduces your MAGI dollar-for-dollar. Investing in tax-exempt municipal bonds keeps interest income out of NII. Harvesting capital losses offsets capital gains. Holding investments inside tax-deferred accounts (IRA, 401(k)) eliminates NII from those assets. For rental property owners, qualifying as a real estate professional can convert passive rental income to active income, removing it from NII.
FAQ
Is this NIIT calculator free?
Yes, completely free with no signup or account required. All calculations happen locally in your browser — your financial data is never sent to any server.
What is the Net Investment Income Tax (NIIT)?
The NIIT is a 3.8% surtax on net investment income for taxpayers whose Modified Adjusted Gross Income (MAGI) exceeds certain thresholds: $200,000 for single filers, $250,000 for married filing jointly, $125,000 for married filing separately. It was enacted as part of the Affordable Care Act to help fund Medicare.
What income counts as net investment income for NIIT?
Net investment income includes interest, dividends (qualified and non-qualified), capital gains, rental income (from passive activities), royalties, and income from passive business activities. It does NOT include wages, self-employment income, active business income, IRA distributions, or Social Security benefits.
How is the NIIT amount calculated?
The NIIT is 3.8% of the LESSER of: (1) your net investment income, or (2) the amount by which your MAGI exceeds the applicable threshold. So if your NII is $30,000 but your MAGI only exceeds the threshold by $20,000, the NIIT applies to only $20,000.
What is the NIIT threshold for 2025?
The 2025 NIIT thresholds are: $200,000 for single filers and head of household, $250,000 for married filing jointly and qualifying widow(er), and $125,000 for married filing separately. These thresholds are NOT inflation-adjusted, so more taxpayers become subject to NIIT over time.
What strategies can reduce NIIT?
Common strategies to reduce NIIT include: maximizing pre-tax retirement contributions to reduce MAGI, investing in tax-exempt municipal bonds (interest is excluded from NII), converting passive activities to active participation, harvesting capital losses to offset gains, holding investments in tax-deferred accounts, and qualifying as a real estate professional.
Does NIIT apply to retirement account distributions?
No. Distributions from IRAs, 401(k)s, and other tax-qualified retirement plans are not subject to NIIT, even though they increase your MAGI. However, Roth IRA distributions are also excluded from MAGI for NIIT purposes since they are not taxable.
Is this calculator accurate for tax filing?
This tool provides a solid estimate based on 2025 NIIT rules, but does not account for all deductions allowable against NII or complex MAGI adjustments. Always consult a tax professional before making tax decisions.