2018 Net Investment Income Tax Threshold
For 2018, the Net Investment Income Tax Threshold figures are 3.8% (Rate), $250,000 (Married filing jointly), $125,000 (Married filing separately) and $200,000 (Single or head of household).
Effective 2018-01-01Source: 2018 Instructions for Form 8960 (IRS)Verified 2026-09-02
Compared with 2017
Every figure on this page is unchanged from 2017.
| Item | 2017 | 2018 | 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
Individuals, estates, and trusts that have net investment income and modified adjusted gross income above the applicable threshold amount.
What changed this year, and why
The 2018 Net Investment Income Tax (NIIT) thresholds and rate, as published by the IRS in the Instructions for Form 8960.
Common questions
- What is the Net Investment Income Tax rate for 2018?
- The rate is 3.8%. It applies to the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold for your filing status.
- What are the 2018 NIIT thresholds by filing status?
- Married filing jointly: $250,000. Married filing separately: $125,000. Single or head of household: $200,000.
What the 3.8% is actually charged on
The 3.8% Net Investment Income Tax is charged on what the IRS calls net investment income. This generally includes gross income from interest, dividends, annuities, royalties, and rents - unless those items come from the ordinary course of a trade or business that is neither a passive activity nor a trading business. It also includes other gross income and net gain from a passive activity or a trading business, to the extent that gain is taken into account in computing taxable income. From this total you then subtract the deductions that the income tax allows and that are properly allocable to those items of gross income or net gain. In short, the base the rate is applied to is investment-style income - interest, dividends, rents, royalties, annuities, and capital gains - minus the directly related deductions, after excluding anything the statute specifically leaves out.
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.
2018 Instructions for Form 8960, Net Investment Income Tax (IRS)
Wages, Social Security and retirement income are outside it
The 3.8% Net Investment Income Tax does not apply to all income you receive. Certain categories are specifically excluded from the definition of net investment income. These include wages and unemployment compensation, Alaska Permanent Fund Dividends, alimony, Social Security benefits, tax-exempt interest income, distributions from qualified retirement plans, and income subject to self-employment taxes. In general, if income is already excluded from gross income under chapter 1 of the Internal Revenue Code, or if it is specifically excluded by section 1411 or related regulations, it falls outside the tax base. This means that ordinary employment income and most retirement distributions are not subject to the 3.8% rate, even if your income exceeds the threshold amounts of $250,000 for married filing jointly, $200,000 for single or head of household, or $125,000 for married filing separately.
Excluded income means: • Income excluded from gross income in chapter 1 of the Internal Revenue Code; • 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. Examples of excluded items are: • 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.
2018 Instructions for Form 8960, Net Investment Income Tax (IRS)
You are taxed on the smaller of two amounts
The 3.8% Net Investment Income Tax is calculated on the smaller of two amounts: your net investment income for the year, or the excess of your modified adjusted gross income over the applicable threshold amount. The threshold depends on your filing status. For married filing jointly or qualifying widow(er), the threshold is $250,000. For single or head of household, it is $200,000. For married filing separately, it is $125,000. If your MAGI exceeds the threshold, you subtract the threshold from your MAGI to determine the excess. You then compare that excess to your net investment income and apply the 3.8% rate to whichever is smaller. This means that even if your investment income is substantial, the tax is limited to the amount by which your total income exceeds the threshold, and vice versa.
The applicable threshold amount is based on your filing status. • Married Filing Jointly or Qualifying Widow(er) is $250,000. • Married Filing Separately is $125,000. • Single or Head of Household is $200,000.
2018 Instructions for Form 8960, Net Investment Income Tax (IRS)
When Form 8960 has to be attached
You must attach Form 8960 to your tax return if your modified adjusted gross income exceeds the applicable threshold amount for your filing status. For 2018, those thresholds are $250,000 if you are married filing jointly or a qualifying widow(er), $200,000 if you are single or head of household, and $125,000 if you are married filing separately. If your MAGI is at or below the threshold for your filing status, you do not owe the 3.8% tax and do not need to file the form. If your MAGI exceeds the threshold and you also have net investment income, you must compute the tax on Form 8960 and attach it to your return. The tax is calculated on the smaller of your net investment income or the amount by which your MAGI exceeds the threshold.
Attach Form 8960 to your return if your modified adjusted gross income (MAGI) is greater than the applicable threshold amount.
2018 Instructions for Form 8960, Net Investment Income Tax (IRS)
The tax does not reach a nonresident alien
The tax does not reach nonresident aliens. If you are a U.S. citizen or resident married to a nonresident alien, your filing status becomes married filing separately for purposes of determining your modified adjusted gross income, your net investment income, and whether you are subject to the tax at all. There are, however, certain elections available that may allow you to file jointly with a nonresident alien spouse, which can change the outcome. The rule reflects the statute's focus on U.S. persons: the tax is imposed under chapter 1 of the Internal Revenue Code, and nonresident aliens are generally not subject to chapter 1 on their foreign-source income. Dual-resident individuals are treated differently - they are generally treated as U.S. residents for purposes of the tax, though special rules may apply to treat them as nonresident aliens for certain purposes.
Nonresidents. 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. However, see information, later, about certain elections to file jointly with NRA spouses.
2018 Instructions for Form 8960, Net Investment Income Tax (IRS)
You get one chance to regroup your activities, tied to your first NIIT year
The IRS provides a one-time "fresh start" regrouping election for taxpayers subject to the Net Investment Income Tax. Normally, passive activity grouping cannot be changed unless the original grouping was clearly inappropriate, but this election allows you to regroup your activities without that restriction. You may make this election for the first tax year you become subject to the 3.8% NIIT, and the new grouping applies to that year and all subsequent years. This election is available only once. If you did not use it in an earlier year when you first became subject to the tax, you may still make the election for the first later year when you owe the tax. You may also regroup on an amended return if you were not originally subject to NIIT but owe it after a change. Regroupings under this election must comply with the disclosure requirements of Rev. Proc. 2010-13. For 2018, the threshold amounts are $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for single or head of household.
However, under the NIIT “fresh start” election you may regroup for the first tax year you’re subject to the NIIT (without the effect of the regrouping). You may regroup only once under this election and that regrouping will apply to the tax year for which you regroup and all future tax years.
2018 Instructions for Form 8960, Net Investment Income Tax (IRS)
Self-employment tax and NIIT do not both hit the same income
For 2018, income used to calculate self-employment tax under section 1401(b) is specifically excluded from the Net Investment Income Tax calculation. This means the same income cannot be subject to both the self-employment tax and the 3.8% NIIT simultaneously. When you're determining your net investment income on Form 8960, you must exclude any net income or loss from a section 1411 trade or business that's already taken into account in determining your self-employment income. This prevents double taxation of the same earnings. For example, if you operate a sole proprietorship and pay self-employment tax on that business income, that same income is not included in your net investment income for NIIT purposes. However, this exclusion applies specifically to income subject to self-employment tax under section 1401(b), so not all business income automatically qualifies. The NIIT threshold amounts for 2018 are $250,000 for married filing jointly, $200,000 for single or head of household, and $125,000 for married filing separately. This coordination rule ensures taxpayers don't face overlapping taxes on the same earnings.
Net income or loss from a section 1411 trade or business that’s taken into account in determining self-employment income.
2018 Instructions for Form 8960, Net Investment Income Tax (IRS)
A part-year resident does not get a part-year threshold
For 2018, if you were a dual-status individual - meaning you were a U.S. resident for part of the year and a nonresident alien for the other part - you're subject to the 3.8% Net Investment Income Tax only during the portion of the year you were a U.S. resident. However, the threshold amounts used to determine whether you owe NIIT are not reduced or prorated based on your dual-status situation. The full threshold amounts apply regardless of how many months you were a resident: $250,000 for married filing jointly, $200,000 for single or head of household, and $125,000 for married filing separately. This means even if you were a U.S. resident for only part of the year, you use the complete annual threshold rather than a pro-rated amount. If you were a U.S. resident on the last day of the tax year, you file Form 1040 and attach a statement showing your income for the nonresident portion. If you were a nonresident on the last day, you file Form 1040NR with a statement showing your income for the resident portion. You may use the appropriate alternate form as your supporting statement.
Dual-status individual. If you were a dual-status individual—that is, an individual who was a resident of the United States for part of the year and an NRA for the other part of the year—you’re subject to the NIIT only for the portion of the year you were a U.S. resident. The relevant threshold amount isn’t reduced or prorated for a dual-status individual.
2018 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.
2018 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.