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David P. McCabe,
WMCP®, ChFC®, CLU®
Financial Planner
Nathaniel D. High, RICP®
Financial Planner
Nicholas J. Over, CFP®
Financial Planner
Sara E. Martin
Operations Manager
Jennifer A. McCabe
Client Service Specialist
jennifer.mccabe@prudential.com
Centuria Financial Group
2333 Baltimore Blvd Suite B
Finksburg, MD 21048
Phone: 443-952-7232
July/August 2025
Net Investment Income Tax and Who Pays It
The net investment income tax (NIIT) affects individuals, estates, and trusts with significant investment income. In its first year (2013), about three million taxpayers were subject to the additional 3.8% net investment income tax (NIIT) in 2013. Since then, the number of affected taxpayers have more than doubled, underscoring the growing relevance of this tax.
What Qualifies as Net Investment Income (NII)
This income includes interest, dividends, capital gains, rental income, and passive income from business interests. When your modified adjusted gross income (MAGI) exceeds $200,000 for single filers or $250,000 for married couples filing jointly, the 3.8% tax kicks in on your net investment income. The tax is paid in addition to any capital gains tax.Mitigating the Impact
Consider maximizing contributions to tax- deferred accounts like IRAs or 401(k)s to lower your MAGI in the current tax year. Try tax-loss harvesting. This technique involves selling underperforming investments at a loss to offset taxable gains. Strategic selling can lower your overall capital gains and your net investment income. If you're close to the threshold income, consider deferring income to a future year or bunching deductions to keep your MAGI below the tax limits for the current year.Consulting a tax professional who understands the complexities of high-net- worth individuals can help you develop a tax strategy tailored to your financial situation.
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David P. McCabe, Nathaniel D. High, and Nicholas J. Over are Financial Planners with, and offer securities and investment advisory service through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial.
LPLE and LPL Financial are not affiliated with Centuria Financial Group.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
Centuria Financial Group and LTM Marketing Specialists LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.
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