NIIT Threshold: $200,000 Single, $250,000 Joint, Never Indexed
The thresholds were written into law in 2013 and have never been adjusted for inflation, so more retirees cross them every year. (IRS: Net Investment Income Tax)
| Filing status | MAGI threshold |
|---|---|
| Single, head of household | $200,000 |
| Married filing jointly, qualifying surviving spouse | $250,000 |
| Married filing separately | $125,000 |
The tax is 3.8% of whichever is smaller: your net investment income, or your MAGI minus the threshold.
What counts as net investment income?
Investment income minus related expenses. The surprise for retirees is what raises MAGI without being taxed itself: IRA withdrawals and Roth conversions don't owe the 3.8%, but they can push the dividends you already have over the line.
| Counts | Doesn't count |
|---|---|
| Interest, dividends | Social Security |
| Capital gains, including mutual fund distributions | IRA, 401(k) and pension payouts |
| Rents and royalties | Home-sale gain within the exclusion |
| Passive business income | Tax-exempt municipal interest |
An example
A married couple with $190,000 of pensions and IRA withdrawals and $90,000 of investment income has MAGI of $280,000 — $30,000 over the line. The NIIT is 3.8% of $30,000, or $1,140 (IRS Topic 409).
Our take: one-time sales are where retirees get caught
Selling a rental, a business or a big stock position can trigger the tax in a single year. Spread sales across tax years, offset gains with losses, or time them for a year with less IRA income. See how much is taxed at 0% on the capital gains tax over 65 calculator, the Medicare impact on the IRMAA calculator, and the whole year on the retirement tax calculator.