The net investment income tax (NIIT) has been a weight on the back of high-income earners for a little more than a decade, but that long time in force has provided tax professionals with ample time to formulate strategies investors can use to reduce the impact of this levy.

A Quick History

The NIIT is a revenue-raising offset that was put into place by the Health Care and Education Reconciliation Act of 2010 to help fund Medicare. The NIIT – which applies to passive income from stock dividends, bond interest, rental income and more – is a 3.8% tax on the lesser of net investment income or the excess of your modified adjusted gross income (MAGI) over your applicable threshold. Those thresholds are:

The tax also applies to the lesser of undistributed net investment income or the excess of adjusted gross income (AGI) over the beginning dollar amount of the estate or trust’s highest tax bracket ($15,200 in 2024).

Strategies for Minimizing NIIT

High-income earners who want to reduce the impact of net investment income tax have a few methods at their disposal, primarily revolving around either reducing MAGI or effectively managing investments. These options include:

Navigating the complexities of the NIIT requires a strategic approach, especially for high-income earners looking to minimize their tax liabilities. BluePointe Capital specializes in providing tax-efficient investment advice and planning that enables high-income earners to optimize their investment outcomes while contributing to their long-term financial health and stability.

Contact us to learn more about our comprehensive investment consulting and advanced planning offerings.