Updated October 2, 2026. Quick answer: Form 8960 figures the 3.8% Net Investment Income Tax. You attach it when your modified adjusted gross income is above the threshold for your filing status: married filing separately at $125,000; single or head of household at $200,000; married filing jointly or qualifying surviving spouse at $250,000. The tax is on the smaller of net investment income or the amount over the threshold, and it carries to Schedule 2 of Form 1040.
Related reading on this site: IRS Publication 527.
Related reading on this site: IRS Publication 550.
Foreign tax credit (Form 1116) and alternative minimum tax (Form 6251) for 2025, read line by line: Form 1116 line 7, Form 1116 lines 20 to 24 and Form 1116 line 35.
Schedule D and Schedule E (Form 1040) for 2025, read line by line: Schedule D lines 16 and 17.
Related reading on this site: Form 8959 Additional Medicare Tax.
Schedule 2 (Form 1040) for 2025, read line by line: Schedule 2 lines 10 and 11 and Schedule 2 line 12.
The shareholder’s Schedule K-1 (Form 1120-S), boxes 13 to 19: Schedule K-1 boxes 14 and 15, Schedule K-1 box 16 and Schedule K-1 box 17 codes A, B and U.
The shareholder’s Schedule K-1 (Form 1120-S), read box by box: Schedule K-1 box 2, Schedule K-1 box 10 and Schedule K-1 box 12.
The partner’s Schedule K-1 (Form 1065), read box by box: Schedule K-1 box 16, Schedule K-1 box 19 and Schedule K-1 box 20 A and B.
More IRS forms and schedules, read line by line: Schedule 2 instructions and Form 6198 instructions.
More IRS forms and schedules, read line by line: Form 8997 instructions.
More IRS forms and schedules, read line by line: Form 4952 instructions, Form 8615 instructions and Form 8814 instructions.
The IRS form or worksheet behind this, read line by line: Form 8582 instructions, Schedule E instructions and Form 8621 instructions.
Price a sale against the 2026 capital gains rates: capital gains tax calculator.
Who must file Form 8960
“Attach Form 8960 to your return if your modified adjusted gross income (MAGI) is greater than the applicable threshold amount.”
For individuals who are citizens or residents the instructions give the rate: “Individuals who have for the tax year (a) MAGI that’s over an applicable threshold amount, and (b) NII, must pay 3.8% of the smaller of (a) or (b) as their NIIT.” One limit: “The NIIT doesn’t apply to nonresident alien (NRA) individuals.”
The Form 1040 instructions for Schedule 2, line 12, set the same trigger: “See Form 8960 and its instructions if the amount on Form 1040, 1040-SR, or 1040-NR, line 11b, is more than:” followed by the three amounts in the table below.
The 2025 form and instructions are the revision the IRS serves as of October 2, 2026, and they apply to returns filed in 2026. A later revision may renumber lines, so check the line numbers against the form in front of you.
The thresholds
“The applicable threshold amount is based on your filing status.” The instructions list:
| Filing status | Threshold amount (2025 instructions) |
|---|---|
| Married filing jointly | $250,000 |
| Qualifying surviving spouse | $250,000 |
| Married filing separately | $125,000 |
| Single or head of household | $200,000 |
The same figures appear in the body text: “Married filing jointly or Qualifying surviving spouse is $250,000.” “Married filing separately is $125,000.” “Single or Head of household is $200,000.” The instructions print these amounts and make no statement about yearly adjustment, so this page makes no claim either way.
MAGI usually equals AGI: “If you didn’t exclude any amounts from your gross income under section 911 and you don’t own an interest in a CFC or PFIC, your MAGI is your AGI as reported on Form 1040 or 1040-SR.”
Part I: investment income
The instructions define the base: “Generally, NII includes gross income from interest, dividends, annuities, royalties, and rents, unless they’re derived from the ordinary course of a trade or business that isn’t (a) a passive activity, or (b) a trade or business of trading in financial instruments or commodities.”
Interest and dividends come from your return. “Enter the amount of taxable interest received.” “Enter the amount of ordinary dividends received.” Gains go on line 5a: “Calculate and enter the amount of net gain or loss from the disposition of property by combining the following amounts from your properly completed return.” For individuals that means Form 1040 line 7a and Schedule 1 line 4, which is where sales reported on Form 8949 and Schedule D end up.
| Form 8960 | Item | Where the number comes from |
|---|---|---|
| Line 1 | Taxable interest | Form 1040 line 2b |
| Line 2 | Ordinary dividends | Form 1040 line 3b |
| Line 3 | Annuities | Gross income from annuities, with listed exceptions |
| Line 4a | Trades, businesses, rents, royalties | Schedules C, E and F, as the instructions describe |
| Line 5a | Net gain or loss from disposition of property | Form 1040 line 7a and Schedule 1 line 4 |
Part II: deductions that reduce the base
Part II takes allowed expenses off investment income. “Investment expenses are described under section 163(d)(4)(C) as the deductions allowed for regular income tax purposes (other than for interest) which are directly connected with the production of investment income.”
The big line for most investors is investment interest: “Enter on Form 8960, line 9a, interest expense you paid or accrued during the tax year deducted on Schedule A (Form 1040), line 9.” On taxes: “Include state, local, and foreign income taxes you paid for the tax year that are attributable to NII.” “Sales taxes aren’t deductible in computing NII.”
Advisory fees do not help here: “Miscellaneous investment expenses are generally no longer deductible.” The instructions name investment fees and custodial fees among the disallowed examples. Foreign tax credits get their own treatment on this page about the foreign tax credit and the NIIT.
How the tax reaches Form 1040
Part III finishes the calculation. Line 13 is MAGI and line 14 is the threshold from the table above. The result lands on the return like this: “Form 1040 or 1040-SR filers: Include this amount on Schedule 2 (Form 1040), line 12.”
Retirement account conversions and distributions are not simply counted: the instructions list “Income from certain qualified retirement plan distributions,” among excluded items, and the effect of a Roth conversion on the MAGI test is covered on the Roth conversion NIIT page. A current-year walkthrough is on the 2026 NIIT page.
Common mistakes
- Assuming you owe the tax just because MAGI is over the threshold. The tax applies to the smaller of net investment income or the excess of MAGI over the threshold.
- Using the wrong threshold for married filing separately. The instructions give its own figure, which is $125,000. Read it from the table rather than guessing.
- Forgetting that investment advisory fees generally cannot be subtracted on line 9c.
Related: the 2026 NIIT guide, Roth conversions and the NIIT, the foreign tax credit and the NIIT, and Form 8949.
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Answer againSources
- Instructions for Form 8960 (2025): https://www.irs.gov/pub/irs-pdf/i8960.pdf
- 2025 Instructions for Form 1040: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
Read from the IRS documents linked above on October 2, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.