Net Investment Income Tax (NIIT) — Form 8960
The Net Investment Income Tax (NIIT) is an additional federal tax that can apply when your
modified adjusted gross income (MAGI) is above a filing-status threshold and you have
net investment income. It is computed on Form 8960 and then reported with your income tax return.
Key IRS references:
About Form 8960
·
NIIT overview
·
NIIT Q&A
·
Tax Topic 559
Who can owe NIIT
For individuals, NIIT is generally triggered when your MAGI exceeds the applicable threshold amount for your filing status.
The threshold amounts are commonly described as not indexed for inflation.
This calculator stores thresholds in a tax-year table so they can be updated if law or IRS guidance changes.
Always verify against current IRS Form 8960 instructions when you need filing-accurate results.
What counts as net investment income
In general, NIIT focuses on certain categories of investment-type income, reduced by certain
deductions properly allocable to that income.
Common examples of items that may be included in net investment income (high-level):
- Interest and dividends
- Capital gains (net gains from disposing of investment assets, to the extent included in taxable income)
- Rental and royalty income
- Non-qualified annuities (in general)
- Income from certain passive activities and certain trading businesses (depending on your facts)
Common examples of items that are generally not included (high-level):
- Wages and self-employment income (these are in the “earned income” world, not NIIT)
- Income from an active business (not passive to you)
- Tax-exempt interest (for example, certain municipal bond interest)
- Excluded gain on the sale of a principal residence (to the extent excluded for regular income tax)
Important: the real NIIT rules are detailed. This calculator uses simplified “component totals” to help planning and learning.
MAGI for NIIT purposes
For many taxpayers, MAGI for NIIT is the same as their regular AGI. However, NIIT’s MAGI definition can include
specific add-backs in certain situations (a common example involves foreign earned income exclusion mechanics).
If you expand this tool later, you can model MAGI from Topic 1 and then add the relevant NIIT-specific adjustments as needed.
The core NIIT calculation
NIIT is computed as 3.8% times the NIIT base. The NIIT base is the lesser of:
(1) your net investment income, or (2) your excess MAGI over the threshold.
This is the same “min rule” emphasized by IRS guidance: if either your net investment income is zero, or your MAGI does not exceed the threshold, the NIIT base is zero.
How this calculator maps to Form 8960
Form 8960 organizes the NIIT computation into: (1) determining net investment income,
(2) applying properly allocable deductions and any required modifications, and (3) computing the tax based on the lesser-of rule.
This calculator mirrors that structure using your simplified totals.
Practical notes and caveats
NIIT is additional to your regular income tax. It can also affect whether you need to increase
withholding or estimated tax payments to avoid underpayment issues.
This tool does not attempt to classify whether an activity is passive vs active, does not compute special foreign corporation adjustments,
and does not model trust/estate NIIT rules. Use it for planning and education, then verify with current IRS Form 8960 instructions for filing.
