Net Investment Income Tax (NIIT)
A 3.8% surtax on investment income for higher-income taxpayers.
The Net Investment Income Tax is a 3.8% surtax that applies to investment income — interest, dividends, capital gains, rental income — for taxpayers whose MAGI exceeds certain thresholds. It was enacted alongside the Affordable Care Act and stacks on top of regular income and capital-gains tax.
For higher earners and those realizing large gains (including from selling appreciated assets or a business), NIIT is a real additional cost that's easy to overlook. It's another reason large income events are worth spreading across years and modeling carefully rather than triggering all at once.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.