Tax-Saving Investments

"My CPA told me: You don't have to spend your HSA — just let it grow." Last week, I reviewed a client's tax return. They contributed $8,300 to their HSA... and panicked thinking they had to spend it all. They'd been saving receipts all year, planning a December shopping spree for eligible expenses. I stopped them cold: "That's FSA thinking. Your HSA never expires." That money? Still sitting there, tax-free, compounding. Completely untaxed growth — potentially for decades. Their face when they realized their HSA could become a stealth retirement account was priceless. The HSA is the ONLY triple-tax-free account in existence: - Tax-deductible going in (immediate savings) - Grows tax-free (no capital gains taxes ever) - Withdraw tax-free for qualified medical expenses — even decades later And if you don't use it for medical expenses? At age 65, it works like a traditional IRA — withdraw for anything, just pay income tax (no penalties). Here's how to actually win with an HSA: - Max out the contribution every year ($8,300 family limit for 2024, rising to $8,550 in 2025) - Do NOT spend it. Pay medical costs out-of-pocket if you can  - Invest the HSA balance — don't leave it in cash earning nothing - Keep every medical receipt digitally. You can reimburse yourself years later, tax-free - Treat your HSA as part of your retirement portfolio — not a short-term medical fund Remember: The average couple needs $315,000 for healthcare in retirement. Your future self will thank you for this tax-free medical nest egg. If your CPA hasn't explained this strategy to you, you're leaving one of the most powerful tax advantages on the table.

Most Family Offices don’t lose wealth by making poor investment decisions—they lose it through inefficiencies. Taxes, fees, and outdated structures quietly erode returns, often without investors realizing it. The most sophisticated Family Offices have figured this out. Instead of focusing solely on higher returns, they prioritize something far more impactful: Structural Alpha. This isn’t about choosing the best hedge fund or private equity deal. Structural Alpha is about optimizing how investments are structured to maximize after-tax returns and eliminate inefficiencies. It’s a way to achieve stronger outcomes not by taking on additional risk but by being more strategic about how capital is deployed. A prime example is Private Placement Life Insurance (PPLI), a tax-efficient structure that allows Family Offices to significantly reduce the tax burden on investments like credit funds. Without it, returns on a credit strategy might shrink from ten percent to seven percent after taxes. With PPLI, those gains can be preserved for a fraction of the cost. Another example is tax-aware investing. Tax-loss harvesting extends far beyond its original application, allowing Family Offices to structure portfolios in a way that minimizes tax liabilities without compromising performance. For Family Offices, this isn’t just an advantage—it’s an essential approach to wealth management. Family Offices exist to preserve and grow generational wealth, yet many still operate within traditional investment frameworks that leave money on the table. By integrating Structural Alpha strategies, they can improve after-tax returns without taking on unnecessary risk, reduce compounding inefficiencies, and ensure long-term capital preservation through smarter structuring. The most forward-thinking Family Offices aren’t just searching for strong investments—they’re refining how they invest. Structural Alpha isn’t a trend; it’s a shift in approach that separates those who quietly optimize their wealth from those who unknowingly give a portion of it away.

𝗛𝗼𝘄 𝘁𝗼 𝘀𝗮𝘃𝗲 €𝟭𝟭,𝟬𝟬𝟬 𝗶𝗻 𝘁𝗮𝘅𝗲𝘀 𝗽𝗲𝗿 𝘆𝗲𝗮𝗿 𝘄𝗵𝗶𝗹𝗲 𝗯𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗹𝗼𝗻𝗴-𝘁𝗲𝗿𝗺 𝘄𝗲𝗮𝗹𝘁𝗵? 🇩🇪 German tax law now rewards energy-efficient real estate investors, especially those buying in the Berlin outskirts. Thanks to the 2024 Sonder-AfA update, eligible new-build properties now qualify for: • 5% special depreciation (Sonder-AfA over 4 years) Standard 5% degressive depreciation = 10% total annual depreciation on building value (decreasing over time) That's real tax money back in your pocket. And it gets better: land can't be depreciated, so lower land prices (e.g., Zossen at €125/sqm vs. Berlin at €4,200/sqm) mean higher effective depreciation. More write-offs. More tax savings. 𝗘𝘅𝗮𝗺𝗽𝗹𝗲: Purchase price: €250,000 Fees (tax + notary): €20,000 Land share: €15,000 = Depreciable amount: €255,000 For singles with a gross income > €100K/year and a 47% marginal tax rate:  • Annual depreciation: €25,500  • Annual tax refund: €11,985 That's nearly €12K/year back in your pocket for four years and nearly 50K over 10 years. Combine that with 95% financing, repayment-free KfW funding, and rental income, and you're looking at IRRs over 20%. Here's a live scenario: • Equity invested: €35,000 • Net profit after 10 years: €119,000 • IRR: 20.49% 𝗥𝘂𝗻 𝘆𝗼𝘂𝗿 𝗼𝘄𝗻 𝗻𝘂𝗺𝗯𝗲𝗿𝘀: https://lnkd.in/d3kj2EPe ------------------------------------------------------------------------------- Hey, I’m Nick Mulder 👋 Founder of Hypofriend, Germany’s leading online mortgage broker helping expats and locals buy homes across Germany. Based in Berlin. Topics: German mortgages, buying property in Germany, Berlin real estate, home financing, and interest rates. Follow for more ↗️

Think the new $40,000 SALT cap solved your tax problem? Think again. For high-income business owners, the real solution is still the Pass-Through Entity Tax (PTET). Here’s why PTET remains the smarter play even with the higher cap: 1)The $40K SALT cap phases out fast: If your income exceeds $500K (joint), the cap quickly shrinks, often back to the $10K minimum. For high earners, the benefit is minimal or nonexistent. 2) PTET stays fully deductible: The OBBBA did not touch PTET. State income tax paid at the entity level is still fully deductible on the federal return, and that benefit flows to owners regardless of itemizing. 3)Works even if you don’t itemize: Since PTET is deducted before income passes through, you get the federal benefit no matter what. 4)Predictability matters: The $40K cap is temporary (2025 to 2029). PTET remains steady and reliable for long-term planning. 5)State rules differ: PTET elections vary, so you must coordinate with your CPA and review annually. For most high-earning pass-through owners, PTET still delivers far more reliable savings than the new SALT cap ever will. 📌 Bottom line: The SALT expansion helps some, but for high earners with large state tax bills, PTET continues to be the stronger strategy.

How investors are taxed for investments in Mutual Funds, PMS, AIFs and REITs Yesterday in our newsletter, Three Point Five, we explained the tax implication on investors when it comes to investments in AIFs and REITs. So, here’s a compilation of the tax implication on investors when they invest in – 1. Mutual funds 2. Portfolio Management Services (PMS) 3. Alternative Investment Funds (AIFs) and 4. REITs (Real Estate Investment Trusts) Mutual Funds: 1. Taxation of mutual funds with over 65% exposure in listed domestic equity instruments): ➡Short-term capital gains (STCG): If held for less than 1 year. Tax Rate: 15%. ➡Long-term capital gains (LTCG): If held for more than 1 year. Tax Rate: 10%. 2. Taxation of mutual funds with 35-65% exposure in listed domestic equity instruments: ➡STCG: If held for less than 3 years. Tax Rate: Added to income and taxed as per individual's slab rate. ➡LTCG: If held for more than 3 years. Tax Rate: 20% with indexation. 3. Taxation of mutual funds with less than 35% exposure in listed domestic equity instruments: ➡Marginal tax rates apply PMS: Under a PMS, investments are held directly in the investor's name, and the tax treatment would depend on the nature of the underlying securities. Equity stock PMS are the most popular amongst investors. Taxation of direct equity stocks apply to these PMS. ➡Short-term (<12 months): 15%. ➡Long-term (>12 months): 10% on gains over INR 1 lakh. ➡Any dividend and/or interest income received is added to the overall income and taxed as per the slab rate. AIFs: Category I and II AIFs are granted pass-through status. This means that the income generated by the fund will be taxed in the hands of the investor and not at the fund level. Check the table for the taxes on the investments depending on the structure and underlying instruments of the AIF. For Category III AIFs, the pass-through tax regime has not been extended, and the investment income is taxed in the hands of the AIF, not the investor. REITS: The tax implication on the investor depends on the type of income/gain – 1. Dividend: ➡If SPVs (Special Purpose Vehicle) have opted for the lower tax regime: Taxed at applicable rates. ➡If SPVs have not opted for the lower tax regime: Exempt. 2. Interest: ➡For Residents: Taxed at applicable rates. ➡For Non-Resident: Taxed at 5%. 3. Rent: ➡Taxable at slab rates 4. Amortisation of debt/repayment of the loan: ➡Up to FY 2022-23: Not taxable. ➡From FY 2023-24 onwards: Distributed amount less the acquisition cost is taxed as Income From Other Sources. 5. Any other income: Exempt. Capital gain on sale of units of REITs: ➡STCG (Listed-STT paid) – Taxed in the hands of the investor at 15% ➡LTCG (Listed-STT paid) – Taxed in the hands of the investor at 10% on gains exceeding 1 lakh. (without indexation) Subscribe to the Dezerv newsletter (LINK IN COMMENTS) for more such insights on investing and wealth creation. #taxation #wealthmanagement #createwealth

Since it's the tax season, it's time for a retrospective. A few years ago, I had a wake-up call. While filing returns, I discovered I owed extra tax — over and above the TDS already cut. Paying that out of my pocket made me uneasy. But more than the money, it made me realize I was missing something in how I managed my finances. That moment became one of the most important triggers that pushed me into self-exploration and my FIRE journey. When I dug deeper, two things stood out as silent tax traps: 1. Fixed Deposit (FD) Interest — stable, yes, but taxed heavily as per your slab. 2. Dividend Income — looks nice when credited, but every payout adds to your tax bill and complicates filing. That’s when I began restructuring. I started dissolving old FDs (though some 5-year lock-ins still linger) and thinking about my entire investment approach. Here's are some conclusions I came to. 1. Keep FDs Minimal FDs are convenient but highly tax-inefficient. My three pain points with FDs today: - You pay tax even if you don’t withdraw the money. In debt funds, tax applies only to the redeemed amount, not the entire corpus growth. - FDs mature and must be reinvested, often manually to get the best rates. - Whatever tax I pay on FDs is arbitrage lost — in MFs, that same money continues compounding. If I don’t redeem in a given year, I pay zero tax even if the corpus grows 6–7%. Debt mutual funds can be a smarter alternative for emergency funds or stable cash flow. They’re flexible, and the taxation works differently, often favoring long-term holding. 2. Choose “Direct Growth” Mutual Funds Instead of holding stocks that keep throwing off taxable dividends (that you don't really need as a salaried, actively earning member), direct growth equity MFs reinvest dividends back into the fund. This way, I don’t get taxed yearly, and my money compounds silently until redemption. 3. Play the Long Game Short-term “kicks” (like dividends or FD interest hitting the account) feel good, but they don’t always serve the bigger goals. Long-term growth through tax-efficient instruments compounds both wealth and peace of mind. My Goals Going Forward 1. Reduce FD exposure to the bare minimum. 2. Shift more individual dividends providing stock allocations into growth MFs to minimize dividend-related tax. Looking back, paying that unexpected tax was frustrating. But in hindsight, it was the best trigger. It forced me to optimize. Taxes are not just bills, they’re signals. They show us where our money structure is inefficient. And if we pay attention, they guide us toward smarter, leaner, and more future-proof investing. Disclaimer: Views are purely shared for educational purposes. Please do your own due diligence and/or consult your tax advisor before making any decision.

There’s a more tax-efficient way to own an index. But is it worth it? Here’s a breakdown of direct indexing: What is direct indexing? It’s still passive investing. But instead of owning an index fund, you own the individual stocks that make up the index. Same market exposure. Different implementation. The goal isn’t higher returns. The goal is tax efficiency. Index funds are already very tax-efficient, especially ETFs. But there’s one thing they can’t do: They can’t pass individual stock losses to investors. Losses inside a fund stay inside the fund. With direct indexing, you own each stock directly. That allows for: Ongoing tax-loss harvesting Offsetting capital gains Deferring taxes while staying invested Over time, this can increase after-tax wealth even if pre-tax returns are similar. Some studies suggest direct indexing can add incremental after-tax value over long periods (often cited at 1%–2%), but results vary widely based on volatility, tax bracket, cash flows, and implementation. Important tradeoffs to understand. This strategy is not a free lunch. Here’s what actually matters. 1) Cost Most platforms charge roughly 0.10%–0.20%. But additional costs may include: Trading costs Cash drag Tracking error Etc. These reduce the net benefit and must be weighed against expected tax savings. 2) New money works best Selling existing index funds to switch strategies often creates taxes that wipe out the benefit. Direct indexing tends to work best with new dollars, such as: Income Liquidity events Sale or acquisition proceeds Using fresh capital avoids unnecessary tax friction. 3) Tax benefits depend on markets The biggest advantage comes from harvesting losses, which requires volatility. In prolonged bull markets: Losses become harder to find Unrealized gains accumulate Tax benefits shift from harvesting losses to deferring gains, and eventually decline. 4) Wash sale coordination matters Loss harvesting must be coordinated across taxable accounts, spousal accounts, and any index funds held elsewhere. Poor coordination can reduce or eliminate the benefit. 5) You need an exit strategy Deferred taxes eventually come due unless there’s a plan. Is this money for retirement, charity, heirs (step-up in basis), or future liquidity? Direct indexing works best when paired with broader tax and estate planning. 6) Benefits skew toward higher earners The tax alpha is largest when tax rates and taxable balances are high. For lower brackets or smaller portfolios, added cost and complexity may outweigh the benefit. Bottom line Direct indexing isn’t a magic upgrade. It’s a tax optimization tool. For the right investor, at the right time, with the right plan, it can add meaningful after-tax value. For others, a low-cost index fund may be the better answer. That’s why this should be a planning decision, not a product pitch. If you’re exploring it, talk with a fee-only planner to see if it actually fits your situation.

Are Family Offices Prepared to Adjust Before the Tax Rules Change Again? The latest tax proposal from the House includes several important changes. These updates favor direct real estate ownership and long-term planning for Family Offices! Some of the benefits include: ➤ Return of 100 Percent Bonus Depreciation Tax Code Reference: IRC Section 168(k) What Changed: The proposal brings back full bonus depreciation for qualifying real estate and equipment. This applies from 2025 through 2029. What It Means: You can fully deduct the cost of new improvements or property purchases in the year they are placed in service. This can significantly reduce taxable income. What Family Offices Should Do: • Focus on industrial, multifamily, and medical office properties, which are already preferred for stability. • Plan capital improvements or acquisitions now to be ready by the 2025 start date. • Work with tax and legal advisors to ensure the timing and structure meet eligibility requirements. ➤ Section 199A Deduction Increase from 20 Percent to 23 Percent Tax Code Reference: IRC Section 199A What Changed: The deduction for Qualified Business Income (QBI) from pass-through entities may increase to 23 percent. What It Means: More income from LLCs, partnerships, and S corporations will be shielded from tax. Family Offices Should: • Review all operating entities to confirm QBI eligibility. • Adjust ownership models if needed to increase tax efficiency. • Update tax projections for each major holding. ➤ Possible Expansion of Opportunity Zones Tax Code Reference: IRC Sections 1400Z-1 & 1400Z-2 What Changed: The bill suggests the creation of new Opportunity Zones. What It Means: Family Offices may have a second chance to invest gains in tax-advantaged projects. Holding qualified OZ assets for 10 years may lead to tax-free growth. Family Offices Should: • Track new zone OZ designations. • Consider how new investments can align with estate and legacy planning. • Reassess earlier OZ investments that may not have met timing or structure goals. ➤ The Larger Message What Changed: The policy direction supports long-term real asset investment, cash flow, and stability. What It Means: This is not just technical tax reform. It is a signal that well-structured real estate plays will continue to be a core tool for wealth preservation. Family Offices Should: • Revisit entity structures and estate planning strategies. • Align legal, investment, and tax teams to ensure the portfolio is optimized. • Avoid the trap of waiting. The advantage lies in acting before changes are fully implemented. What does it all mean? This is the moment for Family Offices and other real estate investors to revisit their portfolios, assess their structure, and make decisions that can protect and grow wealth for the next decade. This is how I see the opportunity. Are there other benefits you’re seeing? Smart tax strategy is proactive. And right now, the window is open.

A few friends reached out to me based on my last post about lowering your effective tax rate. Sharing some ways for stocks: Capital gains tax on stocks in India:  𝗟𝗼𝗻𝗴-𝘁𝗲𝗿𝗺: 10% if CG exceeds Rs.1 lakh. 0 below Rs.1 lakh 𝗦𝗵𝗼𝗿𝘁-𝘁𝗲𝗿𝗺: 15% 𝗙𝗜𝗙𝗢 𝗠𝗲𝘁𝗵𝗼𝗱 Capital gains tax on stocks is calculated using the First-In-First-Out Method.  Let's say you bought only 1 company’s stock this year (Let’s call it “Paymato”): July ‘23 - Bought 100 shares of Paymato @ Rs. 850 per share Dec ‘23 - Bought another 100 shares of Paymato @ Rs. 650 per share Assume price of Paymato in Mar 2024 = @ Rs. 750 per share  𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗹𝗼𝘀𝘀 𝗯𝗲𝗰𝗮𝘂𝘀𝗲 𝗼𝗳 𝘀𝗲𝗹𝗹𝗶𝗻𝗴 𝟭𝟬𝟬 𝘀𝗵𝗮𝗿𝗲𝘀 𝗼𝗳 𝗣𝗮𝘆𝗺𝗮𝘁𝗼 = 𝗥𝘀 𝟭𝟬𝟬 * (𝟳𝟱𝟬-𝟴𝟱𝟬) = 𝗥𝘀 𝟭𝟬,𝟬𝟬𝟬 Why? Because the Income Tax Department assumes you are selling your earliest bought shares i.e. “First In” and those are going out of your portfolio i.e. “First Out” Catch: Transaction costs (<Rs 500). If you still believe in this company and would like to continue holding these stocks, a great strategy would be to sell 100 shares on 31 Mar 2024 and buy 100 shares on 31 Mar 2024. 𝗧𝗮𝘅 𝗛𝗮𝗿𝘃𝗲𝘀𝘁𝗶𝗻𝗴 Now adding more nuance.  Let’s say you had also invested in the same year in “ZoTM” (innovative, I know!) and are sitting on Rs 15,000 short-term capital gains on that stock (kudos to you for that smart move!)  This earlier capital loss of Rs 10,000 recorded on Paymato would offset your capital gains in ZoTM to effectively lower your tax from 15% of Rs 15,000 to 15% of Rs 5,000 𝗶.𝗲. 𝗬𝗢𝗨 𝗝𝗨𝗦𝗧 𝗦𝗟𝗔𝗦𝗛𝗘𝗗 𝗬𝗢𝗨𝗥 𝗖𝗔𝗣𝗜𝗧𝗔𝗟 𝗚𝗔𝗜𝗡𝗦 𝗧𝗔𝗫 𝗟𝗜𝗔𝗕𝗜𝗟𝗜𝗧𝗬 𝗧𝗢 𝟭/𝟯 𝗚𝗿𝗮𝗻𝗱𝗳𝗮𝘁𝗵𝗲𝗿𝗶𝗻𝗴 𝗥𝘂𝗹𝗲 It was introduced by the Government of India to safeguards the investments made by people already invested prior to January 31, 2018 against any rule or policy changes. For instance, if you bought Paymato’s shares on July 1, 2016, for ₹1.5L. If these shares are worth ₹2.0L on January 31, 2018 and ₹3.0L on March 31, 2024. When you finally sell them, you are only liable to capital gains tax of 𝟭𝟬% 𝗼𝗳 (₹𝟯.𝟬𝗟-₹𝟮.𝟬𝗟) 𝗮𝗻𝗱 𝗻𝗼𝘁 𝟭𝟬% 𝗼𝗳 (₹𝟯.𝟬𝗟-₹𝟭.𝟱𝗟) #taxsavings #capitalgainstax #taxdeductions #wealthgrowth #wealthcreation

🚨 𝗦𝗧𝗢𝗣 𝗽𝗮𝘆𝗶𝗻𝗴 𝘁𝗵𝗲 𝗵𝗶𝗱𝗱𝗲𝗻 𝟯.𝟴% 𝘁𝗮𝘅 𝗼𝗻 𝘆𝗼𝘂𝗿 𝘀𝘂𝗰𝗰𝗲𝘀𝘀! 🚨 For high earners, this is taxes on investment and business income. It's called the 𝗡𝗲𝘁 𝗜𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗜𝗻𝗰𝗼𝗺𝗲 𝗧𝗮𝘅 (𝗡𝗜𝗜𝗧), and it quietly adds an 𝗲𝘅𝘁𝗿𝗮 𝟯.𝟴% to your top marginal rate. It’s often avoidable, but only if you prove you’re a Material Participant. 𝗪𝗵𝗮𝘁 𝗶𝘀 𝘁𝗵𝗲 𝗡𝗜𝗜𝗧 (𝗜𝗥𝗖 §𝟭𝟰𝟭𝟭)? Lesser of: - Your NII, or - The amount your MAGI exceeds the threshold. 𝗙𝗶𝗹𝗶𝗻𝗴 𝗦𝘁𝗮𝘁𝘂𝘀 𝗮𝗻𝗱 𝗠𝗔𝗚𝗜 𝗧𝗵𝗿𝗲𝘀𝗵𝗼𝗹𝗱 (𝗮𝗽𝗽𝗿𝗼𝘅.):  1. Married Filing Jointly - $250,000  2. Single / Head of Household - $200,000  3. Married Filing Separately - $125,000 𝗧𝗵𝗲 𝗜𝗻𝗰𝗼𝗺𝗲 𝗦𝘂𝗯𝗷𝗲𝗰𝘁 𝘁𝗼 𝘁𝗵𝗲 𝗧𝗮𝘅: The tax targets passive/unearned income. This includes: - Interest, Dividends, Annuities, and Royalties. - Net gains from the sale of investment property (stocks, bonds, passive real estate). - Income from a trade or business that is a "Passive Activity" (where you do NOT materially participate). - 𝗧𝗵𝗲 𝗸𝗲𝘆 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆 𝗶𝘀 𝘁𝗵𝗶𝘀: 𝗔𝗰𝘁𝗶𝘃𝗲 𝗶𝗻𝗰𝗼𝗺𝗲 𝗶𝘀 𝗲𝘅𝗲𝗺𝗽𝘁 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲 𝗡𝗜𝗜𝗧. 𝗧𝗵𝗲 𝗠𝗮𝘁𝗲𝗿𝗶𝗮𝗹 𝗣𝗮𝗿𝘁𝗶𝗰𝗶𝗽𝗮𝘁𝗶𝗼𝗻 𝗗𝗲𝗳𝗲𝗻𝘀𝗲: The single most effective planning tool to avoid the NIIT on your business or rental income is to convert it from passive (taxable) to non-passive/active (exempt). 𝟭. 𝗙𝗼𝗿 𝗦-𝗖𝗼𝗿𝗽𝘀 𝗮𝗻𝗱 𝗣𝗮𝗿𝘁𝗻𝗲𝗿𝘀𝗵𝗶𝗽𝘀 (𝗞-𝟭 𝗜𝗻𝗰𝗼𝗺𝗲) Your share of income from an S-corp or partnership is generally exempt from NIIT IF you materially participate in the activity. Ensure you meet one of the seven material participation tests (most commonly, the 500-hour rule) for that business. This is the difference between a K-1 distribution being taxed at (e.g.) 37% and 40.8% (37% + 3.8%). 𝟮. 𝗙𝗼𝗿 𝗥𝗲𝗻𝘁𝗮𝗹 𝗥𝗲𝗮𝗹 𝗘𝘀𝘁𝗮𝘁𝗲 Rental income is presumed to be passive. To exclude it from the NIIT, you must be a Real Estate Professional (REP) and materially participate in the rental activity. As discussed yesterday, you must clear the 50% test, the 750-hour test, and materially participate in the rental activity (often using the Grouping Election). 𝗖𝗮𝘀𝗲 𝗦𝘁𝘂𝗱𝘆: $𝟭 𝗠𝗶𝗹𝗹𝗶𝗼𝗻 𝗣𝗮𝘀𝘀𝗶𝘃𝗲 𝗜𝗻𝗰𝗼𝗺𝗲: A highly compensated executive (MAGI > $500k) has $1,000,000 in passive income from an investment in a Limited Partnership (LP). - Executive A (Passive Investor): Pays the 3.8% NIIT on $1,000,000. - Total NIIT: $38,000 - Executive B (Active Partner): Proves material participation in the LP's trade or business. - Total NIIT: $0 That $38,000 is saved before you even factor in the ordinary income tax rate. If you have a K-1, do you know whether the income is characterized as passive or non-passive? That single line determines your 3.8% exposure. What is the riskiest tax planning strategy you've seen high-earners use to reduce their MAGI and duck the NIIT? Share your stories below! 👇 #linkedinforcreators