Return to Articles

How to Avoid the 3.8% Investment Tax and Keep More of Your Money

How to Avoid the 3.8% Investment Tax and Keep More of Your Money

How to Avoid the 3.8% Investment Tax and Keep More of Your Money

Broker checklist
Broker checklist

The Net Investment Income Tax (NIIT) is a 3.8% surcharge tax that increases the effective tax rate imposed on investment property income, such as interest, dividends, capital gains, Income from annuities, rental income, and other passive income. It was designed to help pay for the Affordable Care Act (Obamacare) and has remained part of the tax code since it became effective in 2013. The tax is computed on the smaller net investment income or the excess of modified adjusted gross income over set income thresholds. The income thresholds vary with filing status: $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for single taxpayers. The tax is not indexed to inflation, so many more taxpayers have been affected by this tax since its enactment. This tax is often overlooked since it is not built into the normal tax rate schedules.

To minimize this tax, investors should consider lowering their modified AGI, reducing net investment income, deferring capital gains, and donating appreciated assets. For example, married taxpayers looking to take advantage of the 15% long-term capital gains tax on their sale of stock might be required to pay an 18.8% tax rate if the stock is sold in a year when their modified adjusted gross income is above $250,000. In this case, it might be better to sell the stock in the future when their modified adjusted gross income is lower than the $250,000 threshold.

The Trump administration has floated a proposal to eliminate the NIIT and reduce the maximum long-term capital gains tax rate from 20% to 15%. If these proposals become law, they would give investors much greater flexibility to recognize capital gains without the adverse consequences hidden in the current tax rate structure. Investors should stay aware of tax legislation this year since the tax rates under the Tax Cuts and Jobs Act will expire at the end of 2025.                                    

For additional reading, see:

https://www.kiplinger.com/taxes/more-people-pay-the-nii-surtax-every-year-kiplinger-tax-letter?form=MG0AV3

https://kahnlitwin.com/blogs/tax-blog/reducing-the-3-8-net-investment-income-tax-in-2025-4-key-strategies

https://www.financedevil.com/will-trump-reduce-capital-gains-tax/?form=MG0AV3&form=MG0AV3

DISCLOSURE:

Investment advisor representative of securities and investment advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer, and Registered Investment Advisor. Cetera is under separate ownership from any other named entity. In addition, some Investment advisory services are offered through Fulcrum Wealth Advisors, LLC. Fulcrum Wealth Advisors, LLC is a registered investment advisor in the State of Washington. 

Branch Address: 10940 NE 33rd PL., #210 Bellevue, WA 98004     Branch Phone: 877-400-0260

Fulcrum Wealth Advisors
10940 NE 33rd Pl.
Suite #210
Bellevue, WA 98004

(844) 621-0630
info@fulcrumwa.com

Fulcrum Wealth Advisors, LLC (“FWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Registration as an investment adviser does not imply a certain level of skill or training.

This website is provided for informational and educational purposes only and is intended to provide general information about FWA, its services, and investment-related topics. Nothing contained on this website constitutes investment advice, nor should it be construed as a recommendation, solicitation, or offer to buy or sell any security or investment product. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

Investment advisory services are provided only pursuant to a written investment advisory agreement entered into between FWA and its clients.

Jurisdictional Limitations: FWA provides investment advisory services only in jurisdictions where it is appropriately registered, exempt, or excluded from registration requirements. The information on this website is not directed to, or intended for use by, any person in any jurisdiction where such use would be contrary to applicable laws or regulations.

Any subsequent, direct communication by FWA with a prospective client shall be conducted by a representative who is either registered or qualifies for an exemption or exclusion in the jurisdiction where the prospective client resides.

No Personalized Advice: The information presented on this website is general in nature and does not take into account the individual financial circumstances, investment objectives, or risk tolerance of any specific person. Visitors to this website should not rely on any information herein as a substitute for personalized advice from FWA or from their own financial, tax, or legal professionals.

Testimonials, Endorsements & Third-Party Ratings: This website may include testimonials, endorsements, or third-party ratings. Such testimonials or endorsements are not representative of all clients, and no assurance is given that a current or prospective client will experience the same or similar results.

Where applicable, material conflicts of interest and whether compensation was provided in connection with a testimonial or endorsement are disclosed in accordance with applicable SEC regulations. Testimonials, endorsements, and ratings are not a guarantee of future performance or success.

Tax and Legal Disclaimer: FWA does not provide tax or legal advice. Information on this website should not be construed as tax or legal advice. You are encouraged to consult with qualified tax and legal professionals regarding your specific situation.

Third-Party Links: This website may contain links to third-party websites for convenience or informational purposes. We review the links when they are added and periodically thereafter and have a reasonable basis for believing they convey accurate information relevant to our clients. FWA does not control or assume responsibility for the content, ongoing accuracy, security, or privacy practices of any third-party websites. Accessing such links is at your own risk, and you are not required to link to any information we make available on our website.

© 2026 Fulcrum Wealth Advisors, LLC. All rights reserved.​

Website design: Radically Distinct

Fulcrum Wealth Advisors
10940 NE 33rd Pl.
Suite #210
Bellevue, WA 98004

(844) 621-0630
info@fulcrumwa.com

Fulcrum Wealth Advisors, LLC (“FWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Registration as an investment adviser does not imply a certain level of skill or training.

This website is provided for informational and educational purposes only and is intended to provide general information about FWA, its services, and investment-related topics. Nothing contained on this website constitutes investment advice, nor should it be construed as a recommendation, solicitation, or offer to buy or sell any security or investment product. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

Investment advisory services are provided only pursuant to a written investment advisory agreement entered into between FWA and its clients.

Jurisdictional Limitations: FWA provides investment advisory services only in jurisdictions where it is appropriately registered, exempt, or excluded from registration requirements. The information on this website is not directed to, or intended for use by, any person in any jurisdiction where such use would be contrary to applicable laws or regulations.

Any subsequent, direct communication by FWA with a prospective client shall be conducted by a representative who is either registered or qualifies for an exemption or exclusion in the jurisdiction where the prospective client resides.

No Personalized Advice: The information presented on this website is general in nature and does not take into account the individual financial circumstances, investment objectives, or risk tolerance of any specific person. Visitors to this website should not rely on any information herein as a substitute for personalized advice from FWA or from their own financial, tax, or legal professionals.

Testimonials, Endorsements & Third-Party Ratings: This website may include testimonials, endorsements, or third-party ratings. Such testimonials or endorsements are not representative of all clients, and no assurance is given that a current or prospective client will experience the same or similar results.

Where applicable, material conflicts of interest and whether compensation was provided in connection with a testimonial or endorsement are disclosed in accordance with applicable SEC regulations. Testimonials, endorsements, and ratings are not a guarantee of future performance or success.

Tax and Legal Disclaimer: FWA does not provide tax or legal advice. Information on this website should not be construed as tax or legal advice. You are encouraged to consult with qualified tax and legal professionals regarding your specific situation.

Third-Party Links: This website may contain links to third-party websites for convenience or informational purposes. We review the links when they are added and periodically thereafter and have a reasonable basis for believing they convey accurate information relevant to our clients. FWA does not control or assume responsibility for the content, ongoing accuracy, security, or privacy practices of any third-party websites. Accessing such links is at your own risk, and you are not required to link to any information we make available on our website.

© 2026 Fulcrum Wealth Advisors, LLC. All rights reserved.​

Website design: Radically Distinct

Fulcrum Wealth Advisors
10940 NE 33rd Pl.
Suite #210
Bellevue, WA 98004

(844) 621-0630
info@fulcrumwa.com

Fulcrum Wealth Advisors, LLC (“FWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). Registration as an investment adviser does not imply a certain level of skill or training.

This website is provided for informational and educational purposes only and is intended to provide general information about FWA, its services, and investment-related topics. Nothing contained on this website constitutes investment advice, nor should it be construed as a recommendation, solicitation, or offer to buy or sell any security or investment product. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

Investment advisory services are provided only pursuant to a written investment advisory agreement entered into between FWA and its clients.

Jurisdictional Limitations: FWA provides investment advisory services only in jurisdictions where it is appropriately registered, exempt, or excluded from registration requirements. The information on this website is not directed to, or intended for use by, any person in any jurisdiction where such use would be contrary to applicable laws or regulations.

Any subsequent, direct communication by FWA with a prospective client shall be conducted by a representative who is either registered or qualifies for an exemption or exclusion in the jurisdiction where the prospective client resides.

No Personalized Advice: The information presented on this website is general in nature and does not take into account the individual financial circumstances, investment objectives, or risk tolerance of any specific person. Visitors to this website should not rely on any information herein as a substitute for personalized advice from FWA or from their own financial, tax, or legal professionals.

Testimonials, Endorsements & Third-Party Ratings: This website may include testimonials, endorsements, or third-party ratings. Such testimonials or endorsements are not representative of all clients, and no assurance is given that a current or prospective client will experience the same or similar results.

Where applicable, material conflicts of interest and whether compensation was provided in connection with a testimonial or endorsement are disclosed in accordance with applicable SEC regulations. Testimonials, endorsements, and ratings are not a guarantee of future performance or success.

Tax and Legal Disclaimer: FWA does not provide tax or legal advice. Information on this website should not be construed as tax or legal advice. You are encouraged to consult with qualified tax and legal professionals regarding your specific situation.

Third-Party Links: This website may contain links to third-party websites for convenience or informational purposes. We review the links when they are added and periodically thereafter and have a reasonable basis for believing they convey accurate information relevant to our clients. FWA does not control or assume responsibility for the content, ongoing accuracy, security, or privacy practices of any third-party websites. Accessing such links is at your own risk, and you are not required to link to any information we make available on our website.

© 2026 Fulcrum Wealth Advisors, LLC. All rights reserved.​

Website design: Radically Distinct