🚨 Did you know about the 3.8% Net Investment Income Tax (NIIT)? If your income hits certain thresholds, this tax could apply to you! Here's a quick breakdown and tips to reduce its impact: 🧵👇

1/ What is NIIT?

NIIT applies if your modified adjusted gross income (MAGI) exceeds $200K (single) or $250K (married filing jointly). It’s the lesser of:

💡 MAGI above the threshold

💡 Net investment income

2/ Example:

MAGI: $210K

Investment income: $50K

(Single filer)

$210K - $200K = $10K (excess over threshold)

Tax = $10K × 3.8% = $380

3/ What counts as investment income?

✅ Gains from stocks, bonds, mutual funds, and bitcoin

✅ Real estate gains (excludes primary home, up to $250K/$500K gain)

✅ Dividends & interest

4/ How to reduce NIIT impact:

🔹 Municipal bonds: Their interest is tax-exempt! Shift to muni bonds/ETFs for tax savings. Run the math for after-tax yields first.

🔹 Portfolio rebalancing: Emphasize growth stocks over dividend payers.

🔹 Lower AGI: Contribute to tax-advantaged accounts like 401(k)s, IRAs, or HSAs to stay under the thresholds.

🔹 Installment sales: Spread gains from property sales over years to lower taxable income.

🔹 1031 exchanges: Selling investment property? Use a 1031 exchange to defer capital gains and reduce NIIT exposure.

5/ NIIT is avoidable with planning. Maximize after-tax returns, stay proactive, and consult with a tax professional (like us) to strategize!