Bogleheads On Investing Podcast · bogleheads

Episode 67: Kaye Thomas on income taxes and how to lower them, host Rick Ferri

February 19, 2024·57 min·3 clips

Long-term capital gains can still reach 23.8% with the 3.8% net investment income tax.

1. Bogleheads On Investing episode 67 focuses on income taxes, capital gains, and lowering taxes for investors. 2. Rick Ferri hosts Kaye Thomas, a longtime tax attorney and author of Capital Gains, Minimal Taxes, Go Roth, and Consider Your Options. 3. The episode asks how investors can reduce taxes now, on investment gains, and later in retirement. 4. Thomas starts with ordinary-income brackets, noting the 10%, 12%, 24%, 32%, 35%, and 37% federal rates. 5. He highlights the jump from 12% to 22% and from 24% to 32% as especially important planning points. 6. He then moves to capital gains, explaining the 0%, 15%, and 20% brackets and the 3.8% net investment income tax. 7. Thomas says single filers above $200,000 and married couples above $250,000 can pay the net investment income tax. 8. He explains that the $200,000 and $250,000 thresholds are not indexed for inflation. 9. Thomas next covers the alternative minimum tax, which has 26% and 28% rates and a different set of deductions. 10. He says the 2017 tax law raised the exemption and reduced the number of people affected, leaving incentive stock option exercises as a common trigger. 11. The conversation then turns to phase-outs tied to modified adjusted gross income, including IRMA and Social Security taxation. 12. Thomas says a one-time Roth conversion can raise Medicare premiums under IRMA, and he points listeners to SSA-44 for a later adjustment. 13. He lays out five account types: taxable, Roth, traditional, HSA, and non-deductible traditional contributions. 14. Thomas calls the HSA the gold standard because it can offer a deduction in, tax-deferred growth, and tax-free withdrawals. 15. He says taxable accounts can still work well with buy-and-hold investing because long holding periods lower the effective capital-gains rate. 16. He uses Vanguard Total Stock Market ETF, VTI, as a taxable-account example and notes that stepped-up basis at death can erase appreciated gains. 17. The interview style is direct and instructional, with Ferri moving through tax categories and Thomas answering in plain English. 18. The energy stays practical rather than dramatic, with several corrections and clarifications about RMD timing, QCD timing, and wash-sale rules. 19. Investors with taxable portfolios, Roth planning questions, or charitable-giving strategies would likely benefit most. 20. Listeners looking for light financial chat without technical tax details will probably skip it.

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