Net Investment Income Tax (NIIT)

An additional 3.8% federal tax on net investment income for high earners — including rental net income.

NIIT applies on top of regular income tax when modified AGI exceeds $200K (single) / $250K (married filing jointly). Rental real estate net income generally counts as investment income subject to NIIT — UNLESS the taxpayer qualifies as a Real Estate Professional (REP status) AND materially participates. Active flippers usually escape NIIT (their income is ordinary business income). For most landlords, NIIT effectively raises the top marginal rate on rental profits — material when modeling after-tax cash flow.