Tax Tuesday:
The Net Investment Income Tax (NIIT) is an additional 3.8% tax that applies to higher-income earners on certain types of investment income, including interest, dividends, capital gains, rental income, and passive business income. NIIT doesn’t apply to all taxpayers—only those whose modified adjusted gross income (MAGI) exceeds IRS thresholds ($200,000 for individuals, $250,000 for married couples filing jointly). Once you’re over the threshold, the 3.8% tax applies to the lesser of your net investment income or the amount by which your income exceeds the limit. Understanding how NIIT is triggered helps you plan more strategically—especially when realizing capital gains, timing Roth conversions, or coordinating investment income with Social Security, pensions, or required minimum distributions. Thoughtful planning can minimize exposure and keep more of your investment growth working for you.
