How the Net Investment Income Tax Hits Your Passive Income

Most people focus on income tax brackets, but there is a separate 3.8 percent surtax that quietly eats into investment earnings for higher earners. In this episode, Lucas and Luna break down the Net Investment Income Tax (NIIT) — who it applies to in 2026, what counts as 'investment income' (spoiler: rental real estate and capital gains are included), and a surprising exemption for active real estate professionals. They walk through a realistic scenario: a couple filing jointly with $280,000 in wages and $50,000 in rental income, triggering the NIIT on part of their rental profits unless they qualify under the real estate professional rules. Lucas explains the modified adjusted gross income thresholds ($200,000 single, $250,000 joint) and how the tax applies to the lesser of net investment income or the excess over the threshold. Luna pushes back on whether the NIIT is just a stealth tax on successful savers. They also discuss planning strategies — like managing realized gains in low-income years and the importance of the real estate professional election. A practical episode for anyone with side hustles, rental properties, or a growing portfolio. #NetInvestmentIncomeTax #NIIT #PassiveIncome #InvestmentTax #StealthTax #RealEstateProfessional #MAGI #CapitalGains #RentalIncome #TaxPlanning #TaxStrategy #PersonalFinance #Finance #FexingoBusiness #BusinessPodcast #TaxTips #WealthManagement #IncomeThreshold Keep every episode free: buymeacoffee.com/fexingo