Glossary
Net investment income tax
Also called NIIT
Definition
The net investment income tax (NIIT) is a 3.8%2026 · IRS federal surtax on investment income such as interest, dividends, capital gains and rents for taxpayers with modified AGI above set thresholds. It applies on top of regular income and capital gains tax.
How net investment income tax works
It is reported on Form 8960. Tax-exempt municipal interest and distributions from retirement accounts are not net investment income, although retirement distributions can raise MAGI.
It affects tax-equivalent yield comparisons and real estate sales.
Why it matters to a firm
It's an often-overlooked part of the marginal rate for higher earners.
| 2026 figure | Source |
|---|---|
| Net investment income tax: 3.8% | IRS |
Questions about net investment income tax
What rate is the NIIT?
3.8%2026 · IRS.
Are muni bonds subject to it?
No.
Do IRA withdrawals count?
Not as investment income, but they can raise MAGI.
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Related terms: Tax-equivalent yield · Marginal tax rate
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