Form 8960 NIIT: 3.8% Tax and Thresholds (2026)

Form 8960 computes the 3.8% net investment income tax. The tax is 3.8% of the smaller of net investment income and the amount of modified adjusted gross income over the threshold for your filing status. It is not a fourth long-term capital gains bracket.

Those thresholds are not indexed with the ordinary brackets. Crossing the line by one dollar does not tax your entire income at 3.8%. NIIT stacks on the regular capital gains tax, so a 20% long-term slice can become 23.8% on the portion that is also net investment income. State tax is separate.

Net investment income generally includes taxable interest, dividends, capital gains, rental and royalty income (with important trade-or-business exceptions), and income from businesses that are passive to you. Wages, unemployment, Social Security, and tax-exempt municipal bond interest are typically outside NII, though they can still raise MAGI.

A stock, ETF, crypto, collectible, or investment-property sale that produces a capital gain usually increases NII. Losses and investment expenses can reduce NII under Form 8960 rules. Primary-residence gain excluded under Section 121 is generally not included in NII to the extent it is excluded from AGI. Depreciation recapture and boot from a failed or partial 1031 can still create investment income in the year recognized.

QSBS gain excluded under Section 1202 is generally excluded from AGI and therefore from MAGI and NII to the extent of the exclusion. Remaining taxable QSBS gain can still create NIIT. Do not assume a QSBS sale is NIIT-free without modeling leftover gain and your other income.

The sale itself is still reported on Form 8949 and totaled on Schedule D. NIIT is a separate computation on Form 8960. Getting basis wrong on 8949 can overstate both regular tax and NIIT. Broker 1099-B figures are a starting point, not always the final basis after wash sales, drip reinvestment, or inherited-asset step-up.

Our stocks calculator estimates NIIT when your entered income plus gain suggests you clear the MAGI threshold. It does not reconstruct every Form 8960 modification, excluded trade-or-business income, or properly allocable deduction. High-MAGI households with rental businesses, grouping elections, or large charitable deductions should treat the NIIT line as a planning flag, then complete Form 8960 with a return preparer.

Timing matters. Realizing a gain in a year when MAGI is already over the threshold can create NIIT that would not apply in a lower-income year. Spreading sales across years, pairing gains with harvested losses, or realizing gain after retirement when wages drop can change both the 0%/15%/20% long-term slice and the 3.8% overlay. Those are planning illustrations, not advice.

Enter other taxable income, filing status, and the sale. If MAGI implied by those inputs exceeds the threshold, the estimate can show an NIIT amount. Compare a long-term versus short-term holding period: ordinary-rate short-term tax can dwarf NIIT, but NIIT can still apply to both.

State landers and state-plus-asset combo pages stack state tax after federal tax and NIIT. A Texas or Florida resident can still owe NIIT. A California resident can owe NIIT plus a large state ordinary-income layer. Open the stocks calculator to model a brokerage sale, or the national calculator if you have mixed asset types.

Confirm MAGI, NII, and Form 8960 instructions with IRS Publication 4731 (when applicable), the Form 8960 instructions, and a tax professional before filing. This guide is educational only.

A practical way to see the overlay is to estimate regular capital gains tax first, then ask whether MAGI including the gain is over the threshold and whether the gain is NII. For a pure brokerage stock sale the answers are often yes and yes once MAGI is high enough, so NIIT is 3.8% of the lesser of the gain (net of investment losses and properly allocable deductions) or the MAGI overage. Municipal-bond interest can raise MAGI in some computations while staying out of NII; wages raise MAGI without being NII. That is why two households with the same capital gain can owe different NIIT.

Year-of-sale planning is about MAGI, not about hiding the sale. Charitable bunching, retirement-account contributions, and harvesting losses can change both brackets and NIIT, but they have their own limits and wash-sale traps. Moving to a no-income-tax state does not turn off NIIT. Using the 0% long-term bracket in a low-income year can still create NIIT if the gain itself pushes MAGI over $200,000 (single) or $250,000 (joint). Run the stocks calculator with a realistic “other income” figure rather than leaving income at zero.

Form 8960 also asks about trades or businesses that are passive to you, rental grouping elections, and certain dispositions of partnership or S-corporation interests. Those lines are beyond this calculator. If you sell QSBS, a rental building, or a business interest in the same year as a stock sale, have a preparer complete Form 8960 rather than adding 3.8% to every dollar of Schedule D gain.