Net Investment Income Tax (NIIT)
The Net Investment Income Tax (NIIT) is an additional tax imposed on certain individuals, estates, and trusts that have income exceeding specific thresholds. The tax rate is 3.8% and applies to the lesser of an individual’s net investment income or the amount by which modified adjusted gross income (MAGI) exceeds the threshold.
Net investment income includes interest, dividends, capital gains, rental income, and other income derived from investments, while the thresholds are set at $200,000 for single filers and $250,000 for married couples filing jointly. For example, if a single filer has a MAGI of $220,000 and net investment income of $30,000, the NIIT would apply to $20,000 (the amount by which MAGI exceeds the threshold).
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