NIIT tax question

[michturk2]

Married filing jointly here. My wife will have approximately 65k MAGI. Most of my income will come from capital gains. I know there is a $250,000 income barrier that if we cross it, we will get hit with an additional 3.8% NIIT tax on some/all of the capital gains. My question is, if I exceed that $250,000 barrier, what portion of my capital gains are subject to the additional 3.8% tax? Is it just the amount that exceeds the $250,000, or will all of my capital gains suddenly become subject to the additional 3.8% (in addition to federal and state gains taxes obviously)? The reason I am asking is because I am trying to plan ahead to make estimated tax payments. If the entire amount of my capital gains is subject to the additional 3.8% once we cross over that $250,000 threshold, but I only budget for the usual federal and state taxes without the NIIT, obviously I would get quite a surprise tax bill next year. I would like to avoid that. Thanks.

[MinhT1 · Accepted solution]

The Net Investment Income Tax (NIIT) is calculated at 3.8% on:the lesser of:

• the net investment income, or
• the excess of modified adjusted gross income over the following threshold amounts:
  • $250,000 for married filing jointly or qualifying widow(er)
  • $125,000 for married filing separately
  • $200,000 in all other cases.

Please read this IRS document for more information.