Definition
What is the net investment income tax (NIIT)?
The net investment income tax is an additional 3.8% tax on investment income — such as interest, dividends, capital gains, and rental income — for individuals whose modified adjusted gross income exceeds certain thresholds. It applies on top of ordinary income and capital-gains taxes.
Because the NIIT is tied to income thresholds, it interacts with other decisions — a large capital gain or Roth conversion can push you over the line and add 3.8% to your investment income for the year.
Planning income across multiple years, and coordinating the timing of gains, conversions, and charitable giving, can help manage or avoid the surcharge.
Related terms
This definition is for educational purposes only and does not constitute investment, tax, or legal advice. Rules and thresholds change; consult a qualified professional about your situation.