Alright, so going through the taxes (always a fun time!) and while going through the actual forms (use TurboTax but then I like to go through the forms to really understand how things are calculated).
We sold some stock (long-term) and when I did a couple "what if" scenarios in TurboTax I was surprised the tax was coming out much higher than 15%. Going through the forms I found a "new" tax that we hit called Net Investment Income Tax (3.8% on net investments! -- ouch!). Apparently, it kicks in after hitting $250K (married). It came out in 2013 and we didn't see it before cause we had a kid so we both took time off the last two years.
Doing some research doesn't seem you can do much to avoid it unless you drop your income. We're dual income both W2s so don't get much tax break on any self-employed benefits
. On one side I read somewhere it's only the top 2% that actually get hit with this, so guess we're doing something right to be part of that "elite" group --- bittersweet!
Curious what other's in the same boat do to try to minimize this? We do the whole 401k max and Roth back-door, so it's really what we do in the taxable brokerage accounts. Could load up on tax-exempt muni. I already have a healthy amount of CA munis which are decent returns. Outside of that everything seems to be fair game: qualified dividends, long-term, any interest
.
Seems real estate investing/rental can help but it's really only DEFERRED since the offset amount will eventually get recaptured and that would be subject to NIIT
. So still can't really win.
Guess on the bright side it's still better than being taxed at ordinary income rate (our marginal is 33% plus 10.5% state so looking at 43.5% which always makes me want to cry
)... this is why when they offer the extra graveyard shift at $1K (which goes into the W2), not really worth it
.
Just curious what others in the same boat do.
We sold some stock (long-term) and when I did a couple "what if" scenarios in TurboTax I was surprised the tax was coming out much higher than 15%. Going through the forms I found a "new" tax that we hit called Net Investment Income Tax (3.8% on net investments! -- ouch!). Apparently, it kicks in after hitting $250K (married). It came out in 2013 and we didn't see it before cause we had a kid so we both took time off the last two years.
Doing some research doesn't seem you can do much to avoid it unless you drop your income. We're dual income both W2s so don't get much tax break on any self-employed benefits

Curious what other's in the same boat do to try to minimize this? We do the whole 401k max and Roth back-door, so it's really what we do in the taxable brokerage accounts. Could load up on tax-exempt muni. I already have a healthy amount of CA munis which are decent returns. Outside of that everything seems to be fair game: qualified dividends, long-term, any interest

Seems real estate investing/rental can help but it's really only DEFERRED since the offset amount will eventually get recaptured and that would be subject to NIIT

Guess on the bright side it's still better than being taxed at ordinary income rate (our marginal is 33% plus 10.5% state so looking at 43.5% which always makes me want to cry


Just curious what others in the same boat do.
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