IRMAA really isn’t that big a deal, and while it’s good to be aware of, it should rarely change your actual decision-making. In any case, for IRMAA, income is income; it doesn’t matter much what *kind* of income it is.
It sounds like they’re going to have around $500k to invest, not $800k, since they’ll have a $300k down payment, right?
In terms of taxes, the best way to invest is to buy stocks and hold them long-term. After a bit (IIRC 60 days?) the dividends the stock pays become qualified and taxed at a lower rate, and after a year, selling the stock becomes long-term and taxed at a lower rate.
However, that likely doesn’t make sense from a broader investment perspective, and they really should speak with an investment advisor about how realistic their goals are and how to achieve them, considering factors beyond just taxes.
Also, they may have a tax hit in the year they sell the house. They likely qualify to exclude up to $500k of gain on the sale, and of course you subtract what you paid to buy the house, what you paid for any major improvements to the property, and the expenses you paid as part of the sale (like real estate agent commissions, title searches, etc.), but they still may be left with a substantial profit to pay tax on. And that profit will affect IRMAA two years later (though they can try applying for relief when that comes into play, if their income drops back down).
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IRMAA really isn’t that big a deal, and while it’s good to be aware of, it should rarely change your actual decision-making. In any case, for IRMAA, income is income; it doesn’t matter much what *kind* of income it is.
It sounds like they’re going to have around $500k to invest, not $800k, since they’ll have a $300k down payment, right?
In terms of taxes, the best way to invest is to buy stocks and hold them long-term. After a bit (IIRC 60 days?) the dividends the stock pays become qualified and taxed at a lower rate, and after a year, selling the stock becomes long-term and taxed at a lower rate.
However, that likely doesn’t make sense from a broader investment perspective, and they really should speak with an investment advisor about how realistic their goals are and how to achieve them, considering factors beyond just taxes.
Also, they may have a tax hit in the year they sell the house. They likely qualify to exclude up to $500k of gain on the sale, and of course you subtract what you paid to buy the house, what you paid for any major improvements to the property, and the expenses you paid as part of the sale (like real estate agent commissions, title searches, etc.), but they still may be left with a substantial profit to pay tax on. And that profit will affect IRMAA two years later (though they can try applying for relief when that comes into play, if their income drops back down).