Net Investment Income Tax of 3.8%

A 3.8% surtax applies to net investment income for most single filers with adjusted gross income above $200,000 and most couples filing jointly with AGI above $250,000. This surtax applies only to the amount of net investment income above those thresholds, which aren’t indexed for inflation.

For example, say that a single taxpayer has earned income such as wages and bonus totaling $150,000, plus a $60,000 taxable capital gain and $30,000 of dividends. This filer would owe the 3.8% tax on $40,000, which is the amount of his AGI above $200,000. Because of the surtax, top-bracket

taxpayers typically owe 23.8% instead of 20% on their long-term gains and

dividends. Some investors in the 15% bracket for this income owe the 3.8%

surtax on part or all of it because their adjusted gross income is above the

$250,000/$200,000 thresholds.