I expect my Net Investment Income to exceed my MAGI by a lot for 2025. What do I do?

[skenyonjr]

This investment income is all short and long term cap. gains from equity option trading activities.

[rjs]

Net investment income cannot possibly exceed MAGI. Net investment income is included in MAGI, along with other income.

Will your MAGI exceed the threshold amount for your filing status? If not, you will not have to pay Net Investment Income Tax.

Married filing jointly — $250,000

Married filing separately — $125,000

Single or head of household — $200,000

Qualifying Surviving Spouse — $250,000

If you do not claim the Foreign Earned Income Exclusion, and you do not own a CFC or PFIC, your MAGI for the Net Investment Income Tax is the same as AGI.

[rjs]

If your 2025 income will be more than you expected, you will have to pay tax on the higher income. You might want to increase your withholding for the rest of the year or make estimated tax payments to avoid having a large payment due when you file your tax return, and to reduce or avoid an underpayment penalty.

You can avoid a penalty for 2025 if

• the payment due on your 2025 tax return is less than $1,000, OR
• your withholding and estimated tax payments are at least 90% of the tax on your 2025 tax return, OR
• your withholding and estimated tax payments are at least 100% of the tax on your 2024 tax return (110% if your 2024 AGI was more than $150,000, or $75,000 if your 2025 filing status is married filing separately.)

State rules may be different.