Net investment income tax
A 3.8% tax on investment income, dividends included, once modified AGI passes $200,000 single or $250,000 joint.
Higher earners pay an extra 3.8% on investment income. That's the net investment income tax, NIIT for short. IRS Topic 559 has it start at $200,000 for single and head of household filers, $250,000 for married filing jointly and $125,000 for married filing separately.
You take two numbers, your net investment income and how far your modified AGI is over the threshold, and pay on whichever is smaller. Interest counts as investment income. So do dividends, capital gains, rents and royalties, plus income from any business that is passive to you.
Why care when picking a structure? A C corp dividend is investment income. Say a single owner has $238,000 of income and $158,000 of that is a dividend. NIIT is 3.8% of the $38,000 over $200,000: $1,444, and the 15% dividend tax is still owed on top.
Wages don't count, and neither does self-employment income. S corp profit passed through to an owner who works in the business generally doesn't either, which is why active owners usually avoid NIIT on business income.
Form 8960 is where you work it out.