Net Investment Income Tax (NIIT)
A 3.8% surtax on investment income for higher earners.
What is Net Investment Income Tax (NIIT)?
Applies to the lesser of net investment income or the amount by which modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly). The thresholds are not indexed for inflation. Investment income includes interest, dividends, capital gains, rents, and royalties - but not municipal bond interest or IRA distributions.
Net Investment Income Tax (NIIT): a worked example
A married couple with $300,000 MAGI including $80,000 of dividends pays 3.8% on $50,000 - the excess over $250,000.
More terms in Clients, Strategy & Tax
Sole Proprietorship
A business owned by one person with no legal separation from the owner.
General Partnership
Co-owners share management and unlimited liability; income passes through.
Limited Liability Company (LLC)
Limited liability for owners with pass-through taxation by default.
C Corporation
A separate taxpayer - profits taxed at the corporate level, then again as dividends.
S Corporation
A corporation that passes income through to shareholders, avoiding double tax.
Trust & Estate Accounts
Accounts run by a fiduciary - a trustee or an executor - under a governing document.
Foundations & Charities
Tax-exempt organizations investing for a mission, often in perpetuity.
Client Profile & Data Gathering
The financial and nonfinancial facts every recommendation must rest on.