Net Investment Income Tax (NIIT) Calculator 2026

What is How to Use the NIIT Calculator?

The Net Investment Income Tax (NIIT) is a 3.8% surtax enacted under the Affordable Care Act and codified in IRC § 1411. It applies on top of regular income tax to high earners whose Modified Adjusted Gross Income (MAGI) exceeds certain thresholds: $200,000 for single filers and heads of household, $250,000 for married filing jointly, and $125,000 for married filing separately. Unlike most tax provisions, these thresholds are not indexed for inflation — meaning more taxpayers cross them each year. The NIIT applies to the lesser of (a) your net investment income (NII) or (b) the amount by which your MAGI exceeds the threshold. NII includes taxable interest, dividends (both ordinary and qualified), capital gains (short-term and long-term), rental income (passive only), royalties, and passive business income. Notably excluded from NII are wages, self-employment income, IRA and 401(k) distributions, Social Security benefits, municipal bond interest, and qualified Roth withdrawals (IRC § 1411(c)). For taxpayers with significant investment portfolios, the NIIT can add thousands of dollars to their tax bill. A long-term capital gain taxed at 20% faces an effective federal rate of 23.8% when NIIT applies — plus any state capital gains tax. Understanding whether NIIT applies to your situation is essential for accurate tax planning, especially when considering Roth conversions, capital gains harvesting, or retirement distributions.

How to Use

1. Enter your 2026 MAGI (Modified Adjusted Gross Income) — this is your AGI with certain deductions added back.
2. Select your filing status. Note: married filing separately has a much lower threshold ($125,000) making the NIIT more likely to apply.
3. Enter each type of investment income you expect to receive. Only include passive income — wages and active business income are not NII.
4. Review whether the NIIT applies and the estimated tax amount. Use the breakdown to identify which income types contribute most.
5. Read the reduction strategies to decide whether to adjust your investment approach before year-end.

Tips & Best Practices

• Municipal bond interest is excluded from both regular income tax AND NII — a double benefit for high earners in the NIIT zone.
• Rental real estate professionals who spend 750+ hours per year materially participating in their rentals can treat rental income as active (non-passive), removing it from NII.
• Tax-loss harvesting reduces capital gains, which directly reduces NII and therefore NIIT. A $10,000 gain offset saves $380 in NIIT alone, plus regular capital gains tax.
• IRA and 401(k) distributions (including RMDs) are NOT included in NII — but they do increase your MAGI, which can push more investment income above the NIIT threshold.
• Roth conversions increase MAGI temporarily, potentially triggering or increasing NIIT in the conversion year. Plan conversions carefully when you have significant investment income.

Frequently Asked Questions

Real-world Examples

Filing status:                     Single
MAGI:                              $280,000
NIIT threshold (single):           $200,000

Investment income breakdown:
  Taxable interest:                $5,000
  Dividends (ordinary + qualified):$15,000
  Long-term capital gains:         $20,000
  Total NII:                       $40,000

Step 1 — MAGI overage:
$280,000 − $200,000 = $80,000

Step 2 — NIIT base (lesser of NII or MAGI overage):
min($40,000, $80,000) = $40,000 (NII is the limiting factor)

Step 3 — NIIT amount:
$40,000 × 3.8% = $1,520

Step 4 — Effective rate on NII:
$1,520 ÷ $40,000 = 3.8%

Total NIIT owed: $1,520 (reported on Form 8960, paid via Schedule 2)

Strategy: If this taxpayer harvested $20,000 in capital losses
before year-end, NII would drop to $20,000, and NIIT would be:
$20,000 × 3.8% = $760 — a $760 NIIT savings plus capital gains tax savings.

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