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Two surtaxes, one frozen threshold from 2013 — and bracket creep is doing the rest.
Since 2013, crossing $200,000 (single) or $250,000 (married) of MAGI triggers a 3.8% surtax on investment income — interest, dividends, capital gains, rental income — on top of everything else. The thresholds are written into the statute and have never been inflation-adjusted, so every year more households fall in. Wages and IRA distributions aren't investment income themselves, but they raise MAGI and drag your investment income into the zone — a big Roth conversion can trigger NIIT on income that was never converted. High earners also owe a separate 0.9% Additional Medicare Tax on wages and self-employment income over the same thresholds. This calculator prices both surtaxes so the real marginal cost of that next dollar of gains is visible.
High earners use it before a big gain or Roth conversion: MAGI over $200k/$250k (frozen since 2013) drags investment income into the 3.8%, and wages over the line add 0.9% — the tool prices both surtaxes before they're committed.
Indirectly, yes. Converted amounts are NOT investment income, but they count fully in MAGI. A $150,000 conversion that pushes MAGI past the threshold exposes your dividends, interest, and capital gains to the 3.8% — up to $5,700 of extra tax that has nothing to do with the conversion's own income tax. Size conversions to stop below the line, or split them across December and January.
Counts: taxable interest, nonqualified dividends, capital gains (including the taxable part of a home sale above the $250k/$500k exclusion), rental and royalty income, and business income where you don't materially participate. Doesn't count: wages, active S-corp/partnership income, Social Security, pension and IRA/401(k) distributions, tax-exempt municipal bond interest, and veterans' benefits. Note the trap: muni interest is excluded from BOTH MAGI and NII — one of the few planning levers that moves both.
Because employers must withhold the Additional Medicare Tax once YOUR wages pass $200,000 in a calendar year — they can't see your spouse's income or your filing status. If you're MFJ and under the real $250,000 threshold, the excess withholding comes back as a credit on Form 8959. The reverse trap is worse: two spouses each earning $150k have $300k combined, owe 0.9% on $50k, and had nothing withheld — that's an underpayment surprise at filing.