Learn how NIIT works in 2025, how to calculate it by filing status, and reduce it through personalized tax planning and filing strategies. Check Below and Maximize Your Retirement Savings!
What is NIIT (Net Investment Income Tax)?
NIIT is a 3.8% tax on net investment income (NII) applied to high-income individuals who also receive investment income. It was introduced under the Affordable Care Act and is added on top of your regular income tax.
2025 NIIT Thresholds by Filing Status
| Filing Status | MAGI Threshold |
|---|---|
| Single | $200,000 |
| Head of Household | $200,000 |
| Married Filing Jointly | $250,000 |
| Married Filing Separately | $125,000 |
| Qualifying Widow(er) | $250,000 |
Understanding "Excess Over Threshold"
If your MAGI exceeds the threshold, the extra amount is your "excess over threshold." NIIT is calculated on the lower of your NII or this excess.
Example:
MAGI: $400,000, NII: $200,000, Threshold: $250,000
Excess: $150,000 → NIIT is 3.8% of $150,000 = $5,700
💡 NIIT Auto Calculator (Real-Time)
Filing Status-Based NIIT Reduction Strategies
- Single/HOH: Harvest losses, use tax-exempt bonds, defer gains.
- MFJ: Consider Roth conversions, reduce NII, increase deductions.
- MFS: Consider switching to joint filing if total tax is lower.
- QW: Utilize loss harvesting, reduce MAGI via deductions.
Retirement Withdrawals and NIIT
IRA/401(k) distributions are not NII but increase MAGI. High MAGI can make other NII taxable under NIIT rules. Use Roth conversions to avoid this.
Conclusion
NIIT planning in 2025 is more important than ever. Know your threshold, track MAGI and NII, and use smart strategies to protect your income from unnecessary taxes.
