Net Investment Income Tax (NIIT)
investmentAlso known as: NIIT, Medicare investment tax, net investment income tax
Updated · Written and reviewed by Konstantin Iakovlev
Detailed explanation
Enacted 2013 to fund Medicare under the Affordable Care Act. Applies to the LESSER of (1) net investment income or (2) MAGI minus the threshold. Example: $300K MAGI single + $50K investment income = NIIT of 3.8% × $50K = $1,900 (since $50K is less than $300K-$200K = $100K excess). NIIT does NOT apply to: 401(k)/IRA distributions (separate Medicare HI tax), wage income, self-employment income (separate Additional Medicare Tax), trade/business income from active participation, life insurance proceeds. Pass-through K-1 income from active participation: usually exempt; passive: usually subject.
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