The 3.8% Net Investment Income Tax (NIIT)
The Net Investment Income Tax is an extra 3.8% federal tax on investment income - including capital gains, dividends, interest and rental income - for higher earners. It applies to the lesser of your net investment income or the amount your modified AGI exceeds a threshold: $200,000 for single filers, $250,000 for married filing jointly, $125,000 for married filing separately. These thresholds are not inflation-adjusted. For top-bracket long-term gains this turns 20% into an effective 23.8% federally. Not tax advice.
Source: IRS Topic No. 559, Net Investment Income Tax. Data as of June 2026.
NIIT MAGI thresholds by filing status
| Filing status | MAGI threshold |
|---|---|
| Single | $200,000 |
| Married filing jointly | $250,000 |
| Married filing separately | $125,000 |
| Head of household | $200,000 |
Source: IRS Topic No. 559, Net Investment Income Tax. Data as of June 2026.
The 3.8% Net Investment Income Tax applies to the lesser of net investment income or the amount by which modified AGI exceeds the threshold. These thresholds are fixed in statute and are NOT adjusted for inflation.
How the NIIT stacks on capital gains
The NIIT sits on top of the regular capital gains tax. A long-term gain in the 15% bracket effectively faces 18.8% federally once the NIIT applies; a top-bracket 20% gain faces 23.8%. Add your state capital gains tax for the full combined burden. The NIIT does not apply to gains that are excluded from income - for example, gains within the home-sale exclusion are not net investment income.
Frequently asked questions
What is the 3.8% Net Investment Income Tax?
The NIIT is an additional 3.8% federal tax on net investment income (including capital gains, dividends, interest and rental income) for higher earners. It applies to the lesser of your net investment income or the amount by which your modified AGI exceeds a threshold - $200,000 for single filers and $250,000 for married filing jointly.
Do the NIIT thresholds change with inflation?
No. Unlike the regular tax brackets, the NIIT MAGI thresholds are fixed in statute and have not been adjusted since the tax took effect in 2013. Over time, inflation pulls more taxpayers into NIIT range.
How much does the NIIT add to my capital gains rate?
On the gain it applies to, the NIIT adds 3.8 percentage points. So a top-bracket long-term gain taxed at the 20% federal rate effectively faces 23.8% federally before any state tax.
Does the NIIT apply to the whole gain?
Only to the portion of net investment income that sits above the MAGI threshold. If your modified AGI is $200,000 (single) and you have a $50,000 gain that pushes you $30,000 over the threshold, the 3.8% applies to $30,000, not the full $50,000.
Related
- Long-term capital gains brackets 2026
- Do I owe the 3.8% NIIT?
- Capital gains tax calculator (includes NIIT)
Source: IRS Topic No. 559, Net Investment Income Tax and IRS Topic No. 409, Capital Gains and Losses. General information, not tax advice.
Last updated: 2026-06-21