2017 Net Investment Income Tax Threshold
For 2017, the Net Investment Income Tax Threshold is 3.8% (Rate), $250,000 (Married filing jointly), $125,000 (Married filing separately) and $200,000 (Single or head of household).
Effective 2017-01-01Source: 2017 Instructions for Form 8960 (IRS)Verified 2026-08-29
Compared with 2016
Every figure on this page is unchanged from 2016.
| Item | 2016 | 2017 | Change |
|---|---|---|---|
| Rate | 3.8% | 3.8% | +0% (+0.0%) |
| Married filing jointly | $250,000 | $250,000 | +$0 (+0.0%) |
| Married filing separately | $125,000 | $125,000 | +$0 (+0.0%) |
| Single or head of household | $200,000 | $200,000 | +$0 (+0.0%) |
Who it applies to
Individual taxpayers filing IRS Form 8960 for the 2017 tax year who have net investment income and modified adjusted gross income above the applicable threshold amount.
What changed this year, and why
The Net Investment Income Tax (NIIT) under section 1411 imposes a 3.8% tax on certain investment income of individuals whose modified adjusted gross income (MAGI) exceeds the applicable threshold amount for their filing status. For 2017, the threshold amounts are: $250,000 for married filing jointly or qualifying widow(er); $125,000 for married filing separately; and $200,000 for single or head of household. The tax applies to the lesser of the amount by which MAGI exceeds the threshold or the taxpayer's net investment income.
Common questions
- Who must pay the Net Investment Income Tax?
- The NIIT applies to U.S. citizens and resident aliens whose modified adjusted gross income (MAGI) exceeds the applicable threshold amount for their filing status and who have net investment income. Nonresident alien individuals are not subject to the NIIT.
- How is the Net Investment Income Tax calculated?
- The tax is 3.8% of the smaller of (a) the amount by which your MAGI exceeds the threshold for your filing status, or (b) your net investment income.
What the 3.8% is actually charged on
The 3.8% Net Investment Income Tax (NIIT) applies only to "net investment income," not to all income you receive. Net investment income generally includes ordinary investment returns such as interest, dividends, annuities, royalties, and rents. However, if any of those streams come from a trade or business that is neither a passive activity nor a business of trading in financial instruments or commodities, they are excluded. Net investment income also covers income from passive activities and from trading in financial instruments or commodities, as well as net gains from selling property (to the extent those gains are included in taxable income), except for property held in a non-passive, non-trading business. You then subtract the deductions that are properly allocable to that income or gain to arrive at the final net investment income figure subject to the tax. In short, the tax targets passive investment returns and capital gains, not earnings from active business operations.
Net investment income. Generally, net investment income includes gross income from interest, dividends, annuities, royalties, and rents, unless they’re derived from the ordinary course of a trade or business that isn’t (a) a passive activity or (b) a trade or business of trading in financial instruments or commodities. In addition, net investment income includes other gross income derived from a trade or business that’s (a) a passive activity or (b) a trade or business of trading in financial instruments or commodities. Additionally, net investment income includes net gain (to the extent taken into account in computing taxable income) attributable to the disposition of property other than property held in a trade or business that’s not (a) a passive activity or (b) a trade or business of trading in financial instruments or commodities. To arrive at net investment income, the above items are reduced by deductions allowed against the income tax which are properly allocable to those items of gross income or net gain.
2017 Instructions for Form 8960, Net Investment Income Tax (IRS)
Wages, Social Security and retirement income are outside it
A significant category of income is completely outside the Net Investment Income Tax. The IRS defines "excluded income" as income that is already excluded from gross income under chapter 1 of the Internal Revenue Code, income that is not included in net investment income by definition, and gross income or net gain that is specifically excluded by section 1411, its regulations, or other published guidance. The instructions give a list of common examples: wages, unemployment compensation, Alaska Permanent Fund dividends, alimony, Social Security benefits, tax-exempt interest income, income from certain qualified retirement plan distributions, and income subject to self-employment taxes. Because these items are excluded, they never enter the calculation of the 3.8% tax, even if a taxpayer's modified adjusted gross income is above the applicable threshold amount for their filing status - $250,000 for married filing jointly, $125,000 for married filing separately, or $200,000 for single or head of household.
Excluded income. Excluded income means: Income excluded from gross income in chapter 1 of the Internal Revenue Code (IRC), Income not included in net investment income, and Gross income and net gain specifically excluded by section 1411, related regulations, or other guidance published in the Internal Revenue Bulletin.
2017 Instructions for Form 8960, Net Investment Income Tax (IRS)
You are taxed on the smaller of two amounts
For individual U.S. citizens and residents, the 3.8% tax is not applied to all investment income, nor to all income above the threshold. Instead, the taxpayer owes 3.8% of the smaller of two amounts: (a) the amount by which modified adjusted gross income (MAGI) exceeds the applicable threshold, or (b) total net investment income. The threshold itself depends on filing status: $250,000 for married filing jointly or qualifying widow(er), $125,000 for married filing separately, and $200,000 for single or head of household. This "lesser of" rule means that a taxpayer whose investment income is modest relative to the MAGI excess will pay the tax only on that investment income, while a taxpayer whose MAGI barely exceeds the threshold will owe tax only on that small excess even if investment income is large. In every case the tax base is whichever of the two numbers - MAGI excess or net investment income - is lower, so the 3.8% rate never applies to more than the taxpayer's actual net investment income.
Individuals who have for the tax year (a) modified adjusted gross income (MAGI) that’s over an applicable threshold amount, and (b) net investment income, must pay 3.8% of the smaller of (a) or (b) as their NIIT.
2017 Instructions for Form 8960, Net Investment Income Tax (IRS)
When Form 8960 has to be attached
Form 8960 is the form used to compute the Net Investment Income Tax, and it must be attached to a taxpayer's return whenever the taxpayer's modified adjusted gross income (MAGI) exceeds the applicable threshold amount for their filing status. That threshold is $250,000 for married filing jointly or qualifying widow(er), $125,000 for married filing separately, and $200,000 for single or head of household. If MAGI is at or below the threshold, the taxpayer does not owe any NIIT and generally does not need to attach the form. If MAGI exceeds the threshold, the form must be filed to figure the tax - even if the taxpayer has little or no net investment income, because the 3.8% rate applies to the smaller of net investment income or the MAGI excess. Taxpayers should use Form 8960 to work through the calculation and report the resulting NIIT liability on their return.
Attach Form 8960 to your return if your modified adjusted gross income (MAGI) is greater than the applicable threshold amount.
2017 Instructions for Form 8960, Net Investment Income Tax (IRS)
The tax does not reach a nonresident alien
The Net Investment Income Tax does not apply to nonresident alien individuals. A nonresident alien (NRA) is not subject to the 3.8% tax on any investment income, regardless of how much that income is or how it is sourced. However, the rule has consequences for married couples in which one spouse is a U.S. citizen or resident and the other is an NRA. In that situation, for purposes of determining MAGI, net investment income, and whether the NIIT applies, the couple's filing status is treated as married filing separately - which sets the applicable threshold at $125,000 rather than $250,000. There are limited elections that may allow a couple to file jointly with an NRA spouse for these purposes, but absent such an election the U.S. spouse computes the tax using the lower separate-filer threshold. Dual-resident individuals are generally treated as U.S. residents for the NIIT but may be treated as NRAs under specific treaty-based conditions.
The NIIT doesn’t apply to nonresident alien (NRA) individuals. If you’re a U.S. citizen or resident married to an NRA, your filing status will be married filing separately for purposes of determining your MAGI, net investment income, and whether you’re subject to the NIIT.
2017 Instructions for Form 8960, Net Investment Income Tax (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
2017 Instructions for Form 8960 (IRS)
- Rate
must pay 3.8% of the smaller of (a) or (b) as their NIIT.
- Married filing jointly
Married Filing Jointly or Qualifying Widow(er) is $250,000,
- Married filing separately
Married Filing Separately is $125,000,
- Single or head of household
Single or Head of Household is $200,000.