Transcript:

Have you ever thought about shadow taxes? Most people focus on income taxes, but forget about hidden healthcare traps that can cost them thousands. Let’s fix that. Hi, I’m Hunter Brockway, founder of Boka Retirement Strategies. I help people retire successfully, stress-free, with more money and fewer taxes.

Step one, know what counts as investment income. The 3.8% net investment income tax, NIIT, applies to specific income sources, but not everything is taxed the same way. What is taxed, interest, dividends, capital gains, annuities, passive rental income. What is not taxed, wages, self-employment income, Social Security, Roth IRA withdrawals, life insurance proceeds, municipal bond interest. So your IRA withdrawals don’t trigger this tax, but investment income can push you over key tax thresholds.

Step two, identify your surtax thresholds. The 3.8% surtax applies when your modified adjusted gross income, MAGI, or MAGI, exceeds $250,000 if married filing jointly, $200,000 for individuals, $125,000 for married filing jointly. In trusts and estates, only $15,000. Yes, this is a huge issue for estate planning. If your MAGI is below these amounts, you’re safe, but once you cross these limits, your investment income becomes taxable at an extra 3.8%.

Step three, manage your taxable income. Even if your income sources aren’t directly taxed, your total taxable income can push you above the MAGI limit, triggering higher taxes. Remember, tax-free withdrawals from Roth accounts do not count towards your MAGI. Taxable IRA withdrawals can push you over the threshold. This is why Roth conversions must be carefully planned, which leads to the next step.

Number four, watch out for other hidden healthcare taxes. It’s not just about the 3.8% surtax. You also need to watch out for a 0.9% additional Medicare tax applied to wages and self-employment income over your MAGI thresholds. Medical expense deduction limits, you can only deduct expenses that exceed 7.5% of your AGI. Early IRA withdrawals. If you use an IRA withdrawal from Medicare expenses, you avoid the 10% early withdrawal penalty, but only if expenses exceed 7.5% of AGI.

Step five, use smart tax strategies to reduce healthcare taxes. Roth conversions. Long-term, tax-free growth is powerful, but doing them at the wrong time can push you over the MAGI thresholds in the short term. Salary deferrals to a 401. This can reduce your MAGI and help lower the 3.8% exposure. Proper IRA distribution planning, since IRA distributions are not taxed as investment income. However, taxable distributions from these amounts can push income over MAGI thresholds. Take action. Protect yourself from hidden healthcare taxes. A tax-smart retirement plan is more than just picking investments. It’s about knowing how much you’ll keep after taxes. Do you want a free, tax-smart retirement plan? Start by booking a call on our website at bokaretirement.com. Head to the free assessment page. Look at the calendar. Select a date and time that works for you, and we’ll call you then. Bye.