Tax

What is the net investment income tax?

The net investment income tax — NIIT — is an extra 3.8 % federal tax on investment income: capital gains, dividends, interest, rental income. It applies once your modified adjusted gross income passes $200,000 (single or head of household) or $250,000 (married filing jointly), and only to the smaller of your investment income and the amount above the threshold. The thresholds have been the same since 2013 and are not adjusted for inflation, so more people meet them every year.

Tax is national. This page describes the federal rules in the United States for tax year 2026. Most states add their own income tax on top, so there is never one single US rate. If you live and pay tax in another country, the rules are different — see the flags below.

How it works

On top, not instead. A long-term gain taxed at 15 % becomes 18.8 %; at 20 % it becomes 23.8 %.
Only the overlap. Single, $230,000 of income of which $50,000 is investment income: you are $30,000 over the threshold, so the 3.8 % applies to $30,000 (the smaller number) — $1,140.
A big sale can trigger it. Wages of $150,000 plus a $100,000 gain from selling a stock you held for years puts you at $250,000 — $50,000 over, and $1,900 of NIIT you may not have expected.
Retirement accounts are outside. Gains inside an IRA or 401(k) do not count as investment income for NIIT (though distributions raise your income).
Reported on Form 8960 with your return.

The worked example

Married filing jointly, $220,000 of wages, and this year you sell shares with a $60,000 long-term gain. Income: $280,000 — $30,000 over the $250,000 threshold. NIIT: 3.8 % × $30,000 = $1,140, on top of the 15 % capital gains tax on the whole $60,000 ($9,000).

Figures for 2026 from irs.gov (Rev. Proc. 2025-32 and IR-2025-111), checked September 2026. Your state may tax the same income again. Kiggo does not calculate your tax — your broker reports to you on Form 1099, and the IRS, your state and a tax professional decide.

Kiggo says: NIIT is the surcharge that quietly turns 15 % into 18.8 % once you earn well — and the line it is drawn at never moves.

The typical beginner's mistake

Selling a large, long-held position in one year "because the rate is only 15 %" — and pushing yourself over the threshold, so part of the gain is taxed at 18.8 % plus state tax. Spreading a sale over two tax years is a common, legal way to stay under.

How you see it in Kiggo

Enter your own purchases in Kiggo's portfolio, and it shows the size of your gain. Whether NIIT applies depends on your total income, which Kiggo does not know. Kiggo does not calculate your tax.

Related terms

Capital gains tax Qualified dividends

Frequently asked questions

What is the NIIT rate and threshold?

3.8 % on net investment income above $200,000 of modified adjusted gross income for single filers and heads of household, $250,000 married filing jointly, $125,000 married filing separately. The thresholds are fixed by law and not indexed. Source: IRS Topic 559.

Does NIIT apply to my 401(k) or IRA?

Not to the growth inside them. Distributions from a traditional account are income and can push you over the threshold, but are not themselves subject to NIIT.

Is NIIT a state tax?

No, it is federal. Your state has its own rules on investment income.

Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-22.

Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.