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Do I owe the 3.8% net investment income tax abroad?

The 3.8% net investment income tax needs two things at once: net investment income, and modified adjusted gross income over a fixed threshold that adds back the foreign earned income exclusion. Foreign tax on that income is a credit against your regular US tax — and, since the Federal Circuit's August 2026 decisions, no credit against the 3.8%. A few banded answers give you a read on where you stand and what sits next to it.

By Danilson Ramos · Founder, Atamatax

Updated

About you

Are you a US citizen, green-card holder or US resident for the year?

Sets the threshold: $200,000 single or head of household · $250,000 joint or surviving spouse · $125,000 married filing separately.

Your income, in bands

Bands only. Nothing you choose here leaves your browser unless you ask for the result by email.

Everything — salary, investment income, pensions — with any foreign earned income exclusion added back. The exclusion does not lower this number.

What kinds of investment income?
Did you pay income tax abroad on that investment income?

Your investments

Do you hold an account at a non-US bank or broker?
Do you hold any fund or ETF that is not US-domiciled?

Including inside a wrapper or a pension you choose the investments of.

Combined peak of every non-US account during the year

The highest the total reached at any moment, not the year-end.

Which of these do you hold?

The wrapper decides a lot of the US answer. Tick every one that applies.

Your US filing history

Are your US returns filed for every past year?
Was Form 8621 filed for the non-US funds in past years?
Were FBARs filed for the years they were due?

Free · no account · bands only. A first screen on bands.

Before you rely on this result

What would settle it, and what covers it

Documents or facts needed

  • • Your filing status and modified adjusted gross income for the year (AGI plus any foreign earned income exclusion added back)
  • • Investment income by kind: dividends, interest, gains, rents, fund distributions
  • • Foreign income tax paid on that income, and to which country
  • • Whether any fund or ETF you hold is domiciled outside the US

Where this leads

Simple · $299 — computes Form 8960 next to Form 1116 on your real figures, keeping the credit on the regular tax and off the NIIT.

Also possible: PFIC Portfolio ($499) · Complex ($799). The cheapest route that covers your facts is the right one; a package never covers more than one tax year.

How to read a status

Likely:
The facts entered meet the published test; confirm the inputs before acting.
Possible:
Some facts point this way and others are missing; more information decides it.
Needs review:
These inputs leave it open; a person should look before filing.
Not currently indicated:
Nothing entered triggers it this year; a changed fact can change the answer.
Outside supported scope:
This item is routed to a professional for preparation.

Scope. A banded screen: the 3.8% is settled by Form 8960 on exact figures, and the result never nets a foreign tax credit against it because the Code and the Federal Circuit (August 31, 2026) allow none. This is a computation on the answers you gave, not individualized tax advice.

Tool: /tools/niit-exposure-check

What changes the result

This answer changes if…

Whether the exclusion or the credit is the better route

  • …your foreign income tax rate is above the U.S. rate on the same income — the foreign tax credit tends to leave no U.S. tax and carries excess credit forward; the exclusion cannot.
  • …you were in the United States for more than 35 days in the twelve-month period — the physical-presence test for the exclusion is lost for that period.
  • …the income is a pension, a distribution or investment income rather than earned income — the exclusion covers earned income only; the credit covers foreign tax on any category.
  • …you claimed the exclusion in a prior year and now revoke it — a revocation locks the exclusion out for five years without IRS consent.
  • …you have self-employment income — the exclusion does not reduce U.S. self-employment tax; a totalization certificate does.

Whether the 3.8% net investment income tax applies

  • …your modified adjusted gross income is below the threshold for your filing status — the tax applies only to the lesser of net investment income and the excess over the threshold.
  • …you claim the foreign earned income exclusion — excluded wages are added back for the threshold test.
  • …you rely on a treaty to credit foreign tax against this tax — the credit against the net investment income tax rests on a treaty article and on litigated positions, not on Form 1116.
  • …a PFIC is under a QEF election — QEF inclusions enter net investment income only under a separate election (the 'section 1.1411-10(g)' election).

Each line names a fact that moves the result; what it moves to depends on the rest of your facts. Nothing here is a determination.

How Atamatax calculations are produced — the tests applied, statutory sources and review cadence — is documented in the methodology, and how the engine is validated in accuracy & review. Calculation fixes are recorded in the changelog.

Authorities cited

  • IRC §1411 — IRC §1411 — Net Investment Income Tax (3.8%)
  • IRS Form 8960 — About Form 8960 — Net Investment Income Tax (Individuals, Estates, and Trusts)
  • Instructions for Form 8960 — Instructions for Form 8960 (2025) — thresholds by filing status, MAGI, lines 1–17, CFC/PFIC adjustments
  • IRC §27 — IRC §27 — Taxes of foreign countries and possessions: credit allowed against the tax imposed by chapter 1 to the extent provided in §901
  • IRC §901 — IRC §901 — Taxes of foreign countries and U.S. possessions
  • Christensen v. United States (Fed. Cir. 2026) — Christensen v. United States, No. 24-1284 (Fed. Cir. Aug. 31, 2026) (precedential) — the U.S.–France treaty's Article 24(2)(a) and 24(2)(b) credits are subject to the Code's §§27/901(a) limitation and do not offset the §1411 net investment income tax; reversing 168 Fed. Cl. 263 (2023)
  • Estate of Bruyea v. United States (Fed. Cir. 2026) — Estate of Paul Bruyea v. United States, No. 25-1563 (Fed. Cir. Aug. 31, 2026) (precedential) — the U.S.–Canada treaty's Article XXIV(1) and XXIV(4)(b) credits are subject to the U.S. Law Limitation; the Code and Convention unambiguously preclude offsetting the NIIT by a foreign tax credit; reversing 174 Fed. Cl. 238 (2024)

Primary sources (Cornell Legal Information Institute for the US Code and CFR; IRS.gov for forms, procedures, and treaty documents). This page is general information, not individualized tax or legal advice.

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