The Hidden 3.8% Tax You Can Avoid.
Calculate the Net Investment Income Tax (NIIT) on high-earner investment income and see how much you can reduce your tax burden by applying various savings strategies.
Calculate My NIITNIIT & Savings Strategy Simulator
Step 1: Enter Income Information
Step 2: Enter Net Investment Income (NII)
Step 3: Apply Savings Strategies (Optional)
Real-Time Simulation Results
NIIT Taxable Base (Lesser of)
$0
Original Estimated NIIT
$0
After Applying Strategies
$0
🎉 Total Tax Saved
$0
Taxable Base Comparison Chart
Net Investment Income Tax (NIIT) Key Concepts
What exactly is the NIIT?
The NIIT is a 3.8% surtax on the net investment income (NII) of high-income taxpayers. It is charged in addition to regular income and capital gains taxes.
You are liable for the tax only if (1) your Modified Adjusted Gross Income (MAGI) is over a certain threshold, AND (2) you have net investment income. If either condition is not met, your NIIT is zero.
What are the MAGI thresholds?
These fixed income thresholds are the first test for NIIT liability and are not indexed for inflation.
What income is included in NII?
✅ Generally Included
- Taxable interest, dividends
- Capital gains (from stocks, funds, real estate, etc.)
- Rental and royalty income (from passive activities)
- Income from non-qualified annuities
- Income from passive business activities
❌ Generally Excluded
- Wages, self-employment income
- Social Security benefits
- Tax-exempt interest (e.g., municipal bonds)
- Distributions from qualified retirement plans (401k, IRA)
- Gain on sale of a primary residence (within exclusion limits)
What are the key strategies to reduce NIIT?
The NIIT is imposed on the lesser of your 'MAGI over the threshold' or your 'Net Investment Income'. Therefore, strategies focus on reducing one of these two numbers.
- Reduce MAGI: Maximize contributions to pre-tax retirement accounts (Traditional 401k/IRA) and Health Savings Accounts (HSAs) to lower your MAGI, potentially below the threshold.
- Reduce NII: Harvest capital losses to offset gains, invest in tax-exempt products like municipal bonds, or donate appreciated assets to charity to avoid realizing capital gains.
- Change Income Character: If you are a real estate investor, qualifying as a "Real Estate Professional" can reclassify your passive rental income as non-passive, removing it from NII.
