2023 Net Investment Income Tax Threshold
For 2023, 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 2023-01-01Source: 2023 Instructions for Form 8960 (IRS)Verified 2026-08-29
Compared with 2022
Every figure on this page is unchanged from 2022.
| Item | 2022 | 2023 | 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 U.S. federal income tax returns for the 2023 tax year who have net investment income and modified adjusted gross income above the applicable threshold.
What changed this year, and why
The 2023 Net Investment Income Tax thresholds set by the IRS for individuals under Section 1411. The thresholds determine when the 3.8% tax on net investment income applies, based on filing status.
Common questions
- How is the Net Investment Income Tax calculated?
- Taxpayers whose modified adjusted gross income (MAGI) exceeds the applicable threshold for their filing status must pay 3.8% on the lesser of their net investment income or the amount by which MAGI exceeds that threshold. The tax is reported on Form 8960.
- Are the NIIT thresholds adjusted for inflation?
- The 3.8% rate applies to the tax year 2023. The thresholds are not indexed for inflation and remain the same as in prior years.
What the 3.8% is actually charged on
The 3.8% Net Investment Income Tax is charged on net investment income, which is defined broadly to include most common investment returns. Specifically, it covers gross income from interest, dividends, annuities, royalties, and rents, unless those amounts come from the ordinary course of a trade or business that is neither a passive activity nor a trading business in financial instruments or commodities. Net investment income also includes gross income from a passive activity or a trading business, and net gain from the disposition of property (other than property held in a non-passive, non-trading trade or business), to the extent the gain is taken into account in computing taxable income. In practice, this means that interest you earn on savings, dividends from stocks, rental income, capital gains from selling investments, and royalty payments all count as net investment income. Only amounts that the tax code specifically excludes, such as wages or certain retirement distributions, fall outside the base. The result is that the 3.8% rate applies to the smaller of your net investment income or the amount by which your MAGI exceeds the threshold.
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.
2023 Instructions for Form 8960, Net Investment Income Tax (IRS)
Wages, Social Security and retirement income are outside it
A large share of the income most taxpayers receive is not subject to the 3.8% Net Investment Income Tax at all. The IRS designates certain categories as excluded income, meaning they fall outside the tax entirely. Items specifically listed as excluded 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. These are kept out either because they are excluded from gross income under chapter 1 of the Internal Revenue Code or because section 1411 or related guidance carves them out. As a practical matter, a taxpayer who earns only a salary and receives Social Security and retirement plan distributions has no net investment income and therefore owes no 3.8% tax, regardless of how high their modified adjusted gross income may be. Only investment-type receipts such as interest, dividends, rents, royalties, and capital gains can pull income into the net investment income category.
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.
2023 Instructions for Form 8960, Net Investment Income Tax (IRS)
You are taxed on the smaller of two amounts
The tax you owe is not simply 3.8% of all your investment income, nor is it 3.8% of the amount by which your income exceeds the threshold. The law calculates the base as the smaller of two figures: (a) your net investment income for the year, or (b) the excess of your modified adjusted gross income over the applicable threshold amount for your filing status. You then multiply that smaller amount by 3.8%. The thresholds are $250,000 for married filing jointly (and qualifying surviving spouses), $125,000 for married filing separately, and $200,000 for single filers and heads of household. This structure matters because it protects taxpayers whose MAGI exceeds the threshold only slightly but whose investment income is large: you are never taxed on more than your actual net investment income. Conversely, if your MAGI is well above the threshold but your investment income is modest, the excess of MAGI over the threshold caps the base. The smaller-of rule ensures the tax is always measured against the lesser figure, whichever one that is for your situation.
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.
2023 Instructions for Form 8960, Net Investment Income Tax (IRS)
When Form 8960 has to be attached
Form 8960 must be attached to your federal income tax return whenever your modified adjusted gross income exceeds the applicable threshold amount for your filing status. That threshold is $250,000 if you are married filing jointly or a qualifying surviving spouse, $125,000 if married filing separately, and $200,000 if you are single or filing as head of household. Crossing the threshold by even a dollar triggers the filing requirement. You file the form regardless of whether you ultimately owe any tax after applying the smaller-of-two-amounts rule; the obligation to attach Form 8960 is based solely on whether your MAGI is greater than the applicable threshold amount. Estates and trusts have their own parallel filing requirement when their adjusted gross income exceeds the dollar amount at which the highest individual tax bracket begins, but for individual filers the bright-line test is straightforward: compare your MAGI to the threshold tied to your filing status, and if it is higher, include Form 8960 with your return.
Attach Form 8960 to your return if your modified adjusted gross income (MAGI) is greater than the applicable threshold amount.
2023 Instructions for Form 8960, Net Investment Income Tax (IRS)
The tax does not reach a nonresident alien
The Net Investment Income Tax does not reach nonresident alien individuals. If you are classified as a nonresident alien for U.S. tax purposes, you are not subject to the 3.8% tax, regardless of how much investment income you earn or how your income would compare to the thresholds that apply to U.S. citizens and residents. However, the rule has an important wrinkle for mixed-status couples: a U.S. citizen or resident who is married to a nonresident alien is generally treated as married filing separately when determining MAGI, net investment income, and whether the NIIT applies. The filing status used is married filing separately, with its $125,000 threshold. The IRS instructions also reference certain elections that allow a couple to file jointly even when one spouse is a nonresident alien, which can change how the thresholds and income are measured. For purposes of this tax, then, nonresident aliens themselves are outside its reach, but being married to one can still bring the tax into play for the U.S. spouse.
Nonresidents. The NIIT doesn’t apply to nonresident alien (NRA) individuals.
2023 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.
2023 Instructions for Form 8960 (IRS)
- Rate
must pay 3.8% of the smaller of (a) or
- Married filing jointly
Married Filing Jointly or Qualifying Surviving Spouse 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.