Net Investment Income Tax (NIIT)
The Net Investment Income Tax (NIIT) is an additional 3.8% tax on investment income for individuals with modified adjusted gross income (MAGI) exceeding $200,000 (single) or $250,000 (married filing jointly).
Exam Tip
NIIT = 3.8% on investment income above $200,000/$250,000. NOT indexed for inflation. Does NOT apply to wages or retirement distributions.
What is the Net Investment Income Tax?
The NIIT is a 3.8% tax on certain investment income for high-income taxpayers.
2025 Thresholds (Not Indexed)
| Filing Status | MAGI Threshold |
|---|---|
| Single | $200,000 |
| Married Filing Jointly | $250,000 |
| Married Filing Separately | $125,000 |
What IS Net Investment Income?
Interest, dividends, capital gains, rental income, passive income
What is NOT?
Wages, self-employment income, Social Security, retirement distributions
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Long-Term Capital Gains
Long-term capital gains are profits from selling assets held for more than one year, taxed at preferential rates of 0%, 15%, or 20% depending on taxable income, significantly lower than ordinary income tax rates.
Marginal Tax Rate
The marginal tax rate is the tax rate applied to your last dollar of taxable income, representing the percentage of tax you would pay on an additional dollar of income within your current tax bracket.
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