The Net Investment Income Tax generally applies at a 3.8% rate to the lesser of net investment income or the excess of modified adjusted gross income over the applicable threshold. It is a separate calculation from the regular income tax.

Interest, dividends, certain gains, and some passive business or rental income can be relevant. Not every dollar of household income is itself net investment income, but other income may still affect whether a threshold is exceeded.

When planning a large sale, rental transaction, or retirement conversion, consider the whole return. The interaction between income categories and thresholds can matter even when the transaction looks simple in isolation. State taxes need their own review.

Your next steps

• Identify potential net investment income.
• Check the threshold for your filing status.
• Review Form 8960 when projecting a major transaction.

General education, not individualized tax or legal advice. Illustrations use stated assumptions and do not promise a refund or tax saving.