How is Net Investment Income Tax computed?

The Net Investment Income Tax (NIIT) is computed by applying a 3.8% tax on the lesser of your net investment income or the amount by which your modified adjusted gross income (MAGI) exceeds certain thresholds. For single filers, the threshold is $200,000, and for married couples filing jointly, it is $250,000. Net investment income includes income from interest, dividends, capital gains, rental income, and certain other investment sources. The tax is reported on IRS Form 8960 when filing your federal tax return.