2021 Net Investment Income Tax Threshold
For 2021, 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 2021-01-01Source: 2021 Instructions for Form 8960 (IRS)Verified 2026-08-29
Compared with 2020
Every figure on this page is unchanged from 2020.
| Item | 2020 | 2021 | 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 owe the Net Investment Income Tax and file IRS Form 8960 for the 2021 tax year.
What changed this year, and why
The Net Investment Income Tax thresholds for 2021 remained unchanged from 2020. The tax rate, filing-status thresholds, and application rules are the same as in the prior year.
Common questions
- What is the Net Investment Income Tax rate for 2021?
- The rate is 3.8%.
- What are the income thresholds for 2021?
- The 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. The tax applies when modified adjusted gross income exceeds the applicable threshold.
- Did the thresholds change from 2020 to 2021?
- No. All threshold amounts and the 3.8% rate are the same in 2021 as they were in 2020.
What the 3.8% is actually charged on
The 3.8% Net Investment Income Tax applies to specific types of investment-related income. Net investment income generally includes gross income from interest, dividends, annuities, royalties, and rents, unless these come from the ordinary course of a trade or business that is neither a passive activity nor a trading business. It also includes income from passive activities or trading in financial instruments and commodities, plus net gain from disposing of property (to the extent it's included in taxable income), except for property held in a non-passive trade or business that isn't a trading business. These income items are then reduced by deductions that are properly allocable to them and allowed against income tax. The definition is found in section 1411(c) and related regulations. Importantly, items like wages, unemployment compensation, Social Security benefits, retirement plan distributions, Alaska Permanent Fund Dividends, alimony, tax-exempt interest, and income subject to self-employment taxes are specifically excluded from this calculation.
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 that are properly allocable to those items of gross income or net gain.
2021 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 forms of income. Certain types of income are specifically excluded from the calculation. 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. Examples of excluded items include 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. This means that ordinary employment wages, Social Security retirement benefits, and distributions from retirement plans are not counted as net investment income and are not subject to the 3.8% tax.
Excluded income. 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.
2021 Instructions for Form 8960, Net Investment Income Tax (IRS)
You are taxed on the smaller of two amounts
The 3.8% tax is calculated on the smaller of two amounts. First, individuals who have for the tax year (a) 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. 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, and Single or Head of Household is $200,000. This means you calculate the excess of your MAGI over the threshold amount, then compare that to your net investment income, and the tax is 3.8% of whichever number is smaller. This prevents the tax from exceeding either your excess income above the threshold or your actual investment income.
Individuals who have for the tax year (a) 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. 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.
2021 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 (MAGI) is greater than the applicable threshold amount for your filing status. The threshold amounts vary by filing status: Married Filing Jointly or Qualifying Widow(er) is $250,000, Married Filing Separately is $125,000, and Single or Head of Household is $200,000. If your MAGI exceeds the threshold for your filing status and you have net investment income, you owe the 3.8% tax and must file Form 8960 to calculate the amount. If your MAGI is below the threshold, you do not owe the tax and do not need to file the form.
Who Must File Attach Form 8960 to your return if your modified adjusted gross income (MAGI) is greater than the applicable threshold amount.
2021 Instructions for Form 8960, Net Investment Income Tax (IRS)
The tax does not reach a nonresident alien
The 3.8% Net Investment Income Tax does not apply to nonresident alien (NRA) individuals. If you are 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. This means that nonresident aliens are completely exempt from this tax. However, there are certain elections available to file jointly with NRA spouses, which may affect the tax treatment. The key point is that the NIIT only applies to U.S. citizens and residents, not to nonresident aliens.
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.
2021 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.
2021 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.