Net Investment Income Tax Calculator 2026

The Net Investment Income Tax is a 3.8% surtax charged under section 1411 on the investment income of higher-income individuals. It applies to the lesser of your net investment income and the amount by which your modified adjusted gross income exceeds a fixed threshold. It sits on top of ordinary income tax and capital gains tax rather than replacing either, so it is genuinely an additional charge.

The thresholds are $200,000 for single filers and heads of household, $250,000 for married couples filing jointly and surviving spouses, and $125,000 for married filing separately. These are modified adjusted gross income figures, not taxable income, so they bite before your deductions are taken into account.

No. The IRS states plainly that the threshold amounts are not indexed for inflation. They were written into the statute in 2013 and have never moved. The practical effect is that the charge reaches further into the middle of the income distribution every year, and it caught many more people in 2026 than it did when it was introduced.

You take the lower of two figures and multiply it by 3.8%. The first figure is your net investment income after allocable expenses. The second is your modified adjusted gross income minus the threshold for your filing status. Because it is the lower of the two, someone just over the threshold pays the tax on only a small slice of their investment income, which is why the calculator above shows you which of the two limbs is binding.

Interest, dividends, capital gains, rents, royalties, non-qualified annuities, income from passive business activities and income from trading in financial instruments or commodities. Net gains on selling a partnership or S corporation interest are generally included as well. Allocable expenses, such as investment interest and the foreign or state income taxes properly attributable to that income, are deducted first.

Wages, self-employment income, unemployment compensation, Social Security benefits, alimony, tax-exempt municipal bond interest, most operating income from an active trade or business, and distributions from qualified retirement plans. The excluded portion of a gain on selling your main home is also outside the charge, though anything above the section 121 exclusion is not.

No, and this is the single most common mistake made by Americans abroad. Modified adjusted gross income for section 1411 purposes is your adjusted gross income with the foreign earned income you excluded on Form 2555 added straight back, net of the deductions that exclusion disallowed. So salary you removed from your return entirely still counts towards the threshold, and for 2026 that add-back can be up to $132,900 per person.

Not under domestic law. The IRS position is that credits under sections 27 and 901 are allowed only against the tax imposed by chapter 1 of the Code, while the NIIT is imposed under chapter 2A. So an American in Britain can hold British tax credits far exceeding the entire US income tax bill and still owe 3.8% on their investment income, with nothing available to offset it. That is a genuine instance of double taxation rather than a timing point.

The position is unsettled. The United States Tax Court refused a treaty-based credit in 2021 because the relief article in question granted the credit subject to the limitations of United States law. Two later cases succeeded in the Court of Federal Claims by relying on a separate, standalone relief provision in the French and Canadian treaties. Those decisions were appealed and argued before the Federal Circuit in March 2026, and no decision had been issued by the end of August 2026.

It helps less than it might appear. The successful claims turned on a specific standalone paragraph in the French and Canadian treaties that obliges the United States to grant relief in its own right. The relief article in the US–UK treaty is expressed as operating in accordance with the provisions and subject to the limitations of United States law, which is precisely the wording that defeated the 2021 case. Anyone considering a protective refund claim should take advice on their own facts before the limitation period closes.

It is worth modelling, because a deduction reaches the NIIT while a credit does not. Foreign income taxes properly allocable to your investment income are deductible on Form 8960 and so reduce the amount the 3.8% is charged on. The catch is that section 275(a)(4) makes the choice all or nothing for the year: if you claim the credit for any foreign tax, you cannot deduct any of it. The calculator above prices both routes so you can see which is cheaper on your own figures.

Rarely, but not never. It tends to win where your foreign tax credits are already far larger than your US income tax, so most of the credit is wasted, and where your net investment income is large enough that removing the foreign tax from the base saves more than the credit was ever going to. If your credits are being fully used, or you expect to absorb the carryforward within the ten-year window, crediting is almost always better.

Usually yes. Rents are expressly listed as net investment income, so a UK buy-to-let held by an American is normally within the charge, after allocable expenses and any properly attributable foreign tax. The main exception is where the property is part of a genuine trade or business in which you materially participate, or where you qualify as a real estate professional, in which case the income can fall outside the definition.

It applies to whatever part of the gain is taxable in the United States. The section 121 exclusion removes up to $250,000 of gain, or $500,000 for a married couple filing jointly, and the NIIT does not reach the excluded portion. Everything above it does fall into net investment income. Because Britain gives full private residence relief in most cases, there is frequently no UK tax at all to offset the American charge, which makes the surtax unusually painful on a family home.

No. Nothing is withheld for it, which is why it so often appears as an unexpected balance due. The IRS confirms that the charge is subject to the estimated tax provisions, so it should be funded through quarterly instalments or by asking for additional income tax to be withheld from your wages. Leaving it to the return means underpayment interest on every instalment you missed.

Not on their own. Nonresident aliens are outside the charge. However, if a nonresident alien married to a US citizen makes a section 6013(g) or 6013(h) election to be treated as a resident and file jointly, special rules bring the couple within the regime and their worldwide investment income comes into the base. That election therefore needs to be tested against the higher joint threshold of $250,000 before it is made rather than after.

Yes. For 2026 the 20% long-term capital gains rate begins above $545,500 of taxable income for a single filer and $613,700 for a married couple filing jointly. Once you are over both that figure and the NIIT threshold, a further dollar of long-term gain costs 23.8% federally before any state or foreign tax. That combined rate, not the headline 20%, is the number to plan around.

The realistic levers are managing modified adjusted gross income so it stays nearer the threshold, harvesting losses to shrink net gains, spreading disposals across tax years, using instalment sales, making sure every allocable expense and foreign tax is actually claimed on Form 8960, and reviewing whether a passive activity could become one in which you materially participate. For Americans in Britain the timing of a disposal against the UK tax year is a further lever most planning misses.

No, it models federal tax only. Several states continue to tax former residents and give no relief whatever for foreign taxes paid, so a Californian who has moved to London can face a state charge sitting alongside both the UK tax and the NIIT. If you retain a state filing obligation, that liability has to be estimated separately.

It uses the 2026 rate bands and standard deductions from IRS Revenue Procedure 2025-32, the statutory section 1411 thresholds, and the section 911 add-back required for modified adjusted gross income. It applies the foreign tax credit against chapter 1 tax only, which is where the law allows it. It does not model the alternative minimum tax, itemised deductions beyond the foreign tax election, passive activity limitations, controlled foreign corporation or passive foreign investment company adjustments, or state tax. For a substantial cross-border position, treat the result as a well-founded planning figure and let our specialists prepare the filed numbers.