For a single taxpayer, I have read that there is a 3.8% surcharge on investment income if the person makes more than $200,000 from all sources. Does that even include the income below $200,000?

For example, let's say I have $50,000 in ordinary income and $149,000 in long term capital gains, then I pay no surcharge. But if I have $151,000 in long term capital gains, then I would pay 3.8% of the entire $151,000? Is that how it works?

  • Just FYI, the US tax code almost always prevents the concern you address, which is sometimes called a "tax cliff". There are some exceptions, but they are rare.
    – TTT
    Feb 20, 2018 at 14:28

1 Answer 1


From Medicare taxes and you

The amount you owe is based on the lesser of your total net investment income or the amount of your MAGI that exceeds $200,000 for individuals, $250,000 for couples filing jointly, or $125,000 for spouses filing separately.

In other words, you owe the 3.8% tax on the amount by which your investment income exceeds the income thresholds, or, if your wages alone already are higher than the income thresholds, you'll owe tax on the lesser of net investment income or MAGI that exceeds the thresholds.

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