Tax treatment
NIIT: The 3.8% Surtax on Secondary Gains
A large one-time gain can push you over the threshold for this additional federal tax, on top of ordinary capital gains.
What it is
The Net Investment Income Tax (NIIT) is a federal surtax on investment income — including capital gains — for taxpayers above certain income thresholds, layered on top of whatever capital-gains rate already applies.
Why it matters for a secondary
A secondary sale is often a single large, lumpy gain in one tax year. That gain itself can push your total income over the NIIT threshold for that year even if your income is typically well below it — worth building into your tax reserve estimate rather than assuming only the headline capital-gains rate applies.
Quick facts
- Rate
- 3.8% additional, on top of capital gains tax
- Applies to
- Net investment income above certain income thresholds — confirm current figures, they aren't indexed the same way as ordinary brackets
- Interaction with QSBS
- Gain excluded under Section 1202 is generally also excluded from net investment income — confirm with a tax advisor
Common mistake: Reserving only for the headline long-term capital gains rate and being surprised by the NIIT add-on when the return is actually filed.