If you have been earning a decent living, it’s likely you have come face to face with the net investment income tax.

For most taxpayers, the NIIT is a stealth tax they first find out about when they prepare or receive their tax return.

Are You Subject to the NIIT?

The NIIT applies if your modified adjusted gross income (MAGI) is over the following amounts:1

$200,000 for single filers

$250,000 for married couples filing jointly

$125,000 for married individuals filing separately

When MAGI exceeds these thresholds and you are subject to the NIIT, the NIIT is a flat 3.8 percent on the lesser of2

your net investment income, or

the amount by which your MAGI exceeds the threshold.

Your MAGI for NIIT purposes is likely the same as your adjusted gross income (AGI). The tax code modifies the NIIT AGI only for certain U.S. citizens or residents who live abroad.

Remember, the NIIT is on the lesser of your MAGI or net investment income. That brings up a key question.

What Is Net Investment Income?

Net investment income is3

income from investments, including interest, dividends, and annuities;

net rental income;

income from any business in which you don’t materially participate, including real estate limited partnerships and other real estate investment businesses;

net capital gains earned on the sale of property that is not part of an active business, including rental property, ... Log in to view full article.