The Net Investment Income Tax is Broader Than You Think: The Tax Letter

The 3.8% net investment income tax, which is added to the regular income tax, covers more than you might think.

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The 3.8% net investment income (NII) tax is broader than most taxpayers think. It applies to single filers with modified adjusted gross incomes over $200,000, joint filers with modified adjusted gross incomes (AGIs) over $250,000, and married people filing separately with modified AGIs above $125,000. There are many definitions of modified AGI under federal tax laws, but for this purpose, modified AGI is defined as AGI plus tax-free foreign-earned income. The NII tax, which is added to the regular income tax, is due on the smaller of NII, or the excess of modified AGI over the income thresholds. 

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Joy Taylor
Editor, The Kiplinger Tax Letter

Joy is an experienced CPA and tax attorney with an L.L.M. in Taxation from New York University School of Law. After many years working for big law and accounting firms, Joy saw the light and now puts her education, legal experience and in-depth knowledge of federal tax law to use writing for Kiplinger. She writes and edits The Kiplinger Tax Letter and contributes federal tax and retirement stories to and Kiplinger’s Retirement Report. Her articles have been picked up by the Washington Post and other media outlets. Joy has also appeared as a tax expert in newspapers, on television and on radio discussing federal tax developments.