The Net Investment Income Tax (NIIT) imposes an additional 3.8% tax on what type of income and for whom?

The NIIT, established by the Affordable Care Act and codified in Section 1411, applies a 3.8% surtax on the lesser of net investment income or the amount by which your modified adjusted gross income exceeds the threshold ($200,000 single, $250,000 married filing jointly). Net investment income includes dividends, interest, capital gains, passive rental income, and royalties, but not wages, active business income, or Social Security benefits. Proper income timing and strategies like maximizing pre-tax retirement contributions can help keep MAGI below these thresholds.