Net Investment Income Tax in 2026: Thresholds and Losses
The net investment income tax is a 3.8% federal tax applied to the lesser of net investment income or the amount modified adjusted gross income exceeds the applicable threshold.
For 2026, the thresholds remain:
| Filing status | MAGI threshold | |---|---:| | Married filing jointly | $250,000 | | Married filing separately | $125,000 | | Single or head of household | $200,000 | | Qualifying surviving spouse | $250,000 |
Example 1: The MAGI Excess Controls
A single filer has $190,000 of MAGI before a $30,000 net investment gain.
- Final MAGI: $220,000.
- Net investment income: $30,000.
- MAGI above threshold: $20,000.
- NIIT base: the lesser amount, $20,000.
- NIIT: $20,000 × 3.8% = $760.
If a $10,000 allowable capital loss offsets part of the gain, assume MAGI falls to $210,000 and net investment income to $20,000.
- MAGI above threshold: $10,000.
- NIIT base: $10,000.
- NIIT: $380.
The loss reduced NIIT by $380, exactly 3.8% of $10,000. Reducing both inputs does not create a double benefit because the tax applies to only the lesser input.
Example 2: A Married Couple
A couple filing jointly has $300,000 of MAGI and $80,000 of net investment income.
- MAGI above threshold: $50,000.
- NIIT base: $50,000.
- NIIT: $1,900.
If $25,000 of capital losses reduces both MAGI and net investment income under the complete return, the new figures are $275,000 and $55,000.
- MAGI above threshold: $25,000.
- NIIT base: $25,000.
- NIIT: $950.
Again, the $25,000 loss reduced NIIT by $950, or 3.8% of the loss amount.
Regular Capital-Gains Tax Is Separate
A capital loss may also reduce regular capital-gains tax. A high-income investor whose long-term gain would otherwise face the 20% rate and NIIT might see up to 23.8 cents of current federal tax reduction per dollar of offset gain, subject to thresholds and the full return.
That is not the value of every harvested loss. Some investors are in lower brackets, some losses become carryforwards, and replacement holdings can create future gains.
Planning Questions
- Which side of the NIIT lesser-of test controls?
- Is the gain included in net investment income?
- Does an exception or deduction change the calculation?
- Will the harvested loss be used this year or carried forward?
- What state tax and future basis effects apply?
For regular rate brackets, read capital-gains tax rates for 2026. For the loss waterfall, see carryforward losses explained.
Bottom Line
Capital losses can reduce NIIT, but the 3.8% effect is not doubled because both MAGI and net investment income fall. Apply the lesser-of formula to the complete return and separate current deferral from permanent savings.
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