NIIT (3.8%) + Additional Medicare Tax (0.9%): The Two “Silent” High-Earner Taxes That Blow Up Your April Bill (2026 Guide)

Intro: If you owed taxes “out of nowhere,” it wasn’t random.

High earners usually don’t get wrecked by the regular brackets. They get hit by quiet add-on taxes that don’t show up cleanly in payroll—especially when you have bonuses, RSUs, dividends, interest, or capital gains.

This is rarely “you messed up.” It’s usually:

  • Thresholds: NIIT + Additional Medicare kick in once you cross the line.

  • Payroll gaps: wages are handled; investment income + RSU timing often aren’t.

  • One big event: a vest, a sale, a bonus pushes you over.

Official IRS definitions (bookmark):

Key Takeaways (read this first)

Snippet-ready threshold table

Tax Rate Triggers when you exceed
NIIT 3.8% MAGI over $200k (Single/HOH), $250k (MFJ), $125k (MFS)
Additional Medicare Tax 0.9% Medicare wages/SE income over $200k (Single/HOH), $250k (MFJ), $125k (MFS)

Employer rule (important): your employer must start withholding the extra 0.9% once your wages from that employer exceed $200,000, regardless of filing status.

⚠️ The “Inflation Trap”: unlike normal tax brackets, these $200k/$250k thresholds are NOT indexed for inflation. Translation: more households get snagged over time just from raises/inflation.

Step 0 — Diagnosis (pick your path in 30 seconds)

A) Mostly W-2 wages, no real investing → go Step 1
B) W-2 + bonus/RSUs/commission OR two high incomes (spouse too) → go Step 2
C) Meaningful investment income (dividends/interest/cap gains/rentals) → go Step 3
D) Self-employment income (or wage + self-employment mix) → go Step 4

Step 1 — Quick win: make payroll do more of the heavy lifting

Goal: avoid the classic high-earner mistake—paying the right tax, just at the wrong time.

Fastest fix: add a flat extra withholding amount so every paycheck patches the gap.

📍 Where: Form W-4 → Step 4(c) (Extra Withholding)
Official form: [IRS PDF: Form W-4 (Employee’s Withholding Certificate)]


Need a step-by-step guide to fix your W-4? Don’t guess the numbers. See exactly how to adjust Line 4(c) to stop the bleeding.
👉 [2026 Tax Brackets & Withholding: Fix the “22% Bonus Trap”]

💡 If you’re doing this because you overpaid last year and you’re waiting on your money:
👉 [2026 IRS Refund Schedule: When Will You Get Paid?]

Step 2 — The “two-income / RSU household” trap (why you still owe)

This is where high earners get blindsided:

  • Payroll withholds based on your wages, not the full household picture.

  • Your spouse’s income + your investment income can push you over NIIT/Additional Medicare thresholds even when payroll looked “fine.”

  • Additional Medicare withholding can be “correct” per employer and still be “wrong” for your household outcome (MFJ + uneven incomes is common).

Fix: use W-4 Step 4(c) to add extra withholding during RSU/bonus-heavy months (or all year).

👉 [2026 Tax Brackets & Withholding: Fix the “22% Bonus Trap”]

Step 3 — NIIT (3.8%): the investor tax that shows up after the fact

NIIT applies if you have net investment income and your MAGI exceeds the threshold. It’s 3.8% on the lesser of:

  • your net investment income, or

  • the amount your MAGI exceeds the threshold.

NIIT commonly includes dividends, interest, capital gains, certain rental/royalty income, and more (with exceptions).

Form alert: NIIT is reconciled on Form 8960.

💡 Pro Move: Tax-Loss Harvesting kills NIIT

NIIT is calculated on Net Investment Income. If you have capital gains, strategically selling losing positions (tax-loss harvesting) can reduce your net gains—which can reduce your NIIT bill too (not just your capital gains tax).
If you’re near the NIIT threshold, the “pro” move is planning gains/losses before year-end, not discovering the surcharge in April.

Step 4 — Additional Medicare Tax (0.9%): payroll can’t perfectly “solve” this for couples

Additional Medicare Tax applies to Medicare wages + self-employment income above the threshold.

Two gotchas:

  1. Employer withholding rule is blunt: withholding starts once your wages from that employer exceed $200,000.

  2. Wage + self-employment mix: the IRS calculation uses a specific ordering method (wages effectively reduce the threshold available for self-employment income).

📝 The Form Number (expert signal): Just like NIIT uses Form 8960, the Additional Medicare Tax is reconciled on Form 8959. If you see Form 8959 in your return, that’s where the 0.9% math happens.

Pro Tip for High Earners: Don’t fix taxes and forget retirement

If you’re adjusting payroll anyway, make sure your retirement contributions aren’t stuck on last year’s settings.
👉 [401(k) Limit Is $24,500 in 2026: The Max-Out Plan]

FAQ (Featured Snippet Targets)

Q1) What are the NIIT thresholds?
NIIT generally applies when MAGI exceeds $200,000 (single/HOH), $250,000 (MFJ), or $125,000 (MFS) and you have net investment income.

Q2) What are the Additional Medicare Tax thresholds?
The 0.9% Additional Medicare Tax applies above $200,000 (single/HOH), $250,000 (MFJ), or $125,000 (MFS). Employers must withhold once wages exceed $200,000 from that employer.

Q3) Why do more people get hit every year?
Because the $200k/$250k thresholds aren’t indexed for inflation, so raises/inflation pull more households into the zone over time.

Q4) What form calculates these taxes?
NIIT is computed on Form 8960 and Additional Medicare Tax is reconciled on Form 8959.

Wrap-up (the shortest path to “I did this right”)

  • Treat NIIT (3.8%) + Additional Medicare (0.9%) as the two silent taxes behind surprise balances.

  • Patch cashflow using W-4 Step 4(c) so you’re not paying late.

  • If you invest in taxable accounts, tax-loss harvesting can shrink net investment income and reduce the NIIT sting.

Disclaimer

Disclaimer: This article is for informational purposes only and does not constitute financial or tax advice. Tax laws and thresholds are subject to change. Consult with a qualified CPA or financial advisor before making decisions.