GLOSSARY · TAX & ESTATE
Net Investment Income Tax (NIIT)
A 3.8% US tax on investment income, including capital gains, interest, dividends and rent, for US citizens and resident aliens whose modified adjusted gross income is above a threshold that depends on filing status. The thresholds are fixed in the statute and are not indexed for inflation. It is reported on Form 8960; the IRS position is that a foreign tax credit cannot reduce it, and the Federal Circuit agreed on 31 August 2026 in cases under the Canada and France treaties, with the India treaty not before the court.
Also called: NIIT, 3.8% tax, Medicare surtax on investment income, Form 8960
FORMULA
NIIT = 3.8% × the smaller of net investment income and (MAGI − threshold)
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CHAPTER · TWO-COUNTRY MONEY · FOUNDATIONSThe Treaty and the Foreign Tax CreditCHAPTER · TWO-COUNTRY MONEY · FOUNDATIONSIndian Funds and Shares for a US TaxpayerRELATED TERMS
SOURCES
- 26 U.S. Code § 1411: Net investment income tax. Legal Information Institute, Cornell Law School.
- Topic no. 559, Net investment income tax. Internal Revenue Service.
- 26 CFR 1.1411-1(e), credits not allowed against the net investment income tax. Code of Federal Regulations.
- Estate of Bruyea v. United States, No. 2025-1563 (Fed. Cir. Aug. 31, 2026). U.S. Court of Appeals for the Federal Circuit.