NerdWallet's Smart Money Podcast - The Affordable Home You Overlooked and the Investment Tax Trap You Need to Prepare For

Episode Date: June 4, 2026

Learn whether manufactured homes could be your path to homeownership and how to get ahead of a tax bill from your investments. Could a decades-old federal rule be standing between you and an affordable home? Hosts Sean Pyles, CFP®, and Elizabeth Ayoola are joined by senior news editor Rick VanderKnyff, along with mortgage writers Abby Badach Doyle and Kate Wood, to explore whether manufactured homes could offer a real path to homeownership for buyers priced out of the traditional market. They dig into how modern manufactured homes have changed, why the 21st Century ROAD to Housing Act is drawing renewed attention to an obscure chassis rule from 1976, and what you need to know about financing, appreciation, and whether these homes are finally having their rebrand moment. Then, investing and taxes editor Bella Avila helps answer a listener's question about how to handle a growing tax bill from investment income. They discuss how taxable accounts can trigger unexpected tax bills, how to decide between adjusting your W-4 and making estimated tax payments, and why strategies like stashing money in a HYSA or CD might not work out the way you'd hope. Locked Out: 3 Outdated Myths About Manufactured Homes https://www.nerdwallet.com/mortgages/news/locked-out-manufactured-homes-affordable-housing-crisis  Subscribe to MoneyNerd, our podcast’s weekly email newsletter, at https://moneynerd-nerdwallet.beehiiv.com/  Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, Elizabeth, we have to talk about the newsletter. What newsletter are you talking about, Sean? You mean the new, free, smart money email newsletter? Yes, and I have to say it is so good. It really is. It has clips, episode roundups, and behind the scenes takes from me, you, and our producer, the stuff that makes you feel like you're really part of the show. And listeners, for the record, you actually are part of the show.

I'm going to be sharing personal stuff. You know, I love sharing my business, and I'm going to be sharing parenting tips from an eight-year-old. a single mom perspective. And I am loading up the newsletter with my favorite gardening tips and lots of cute photos from my garden, including my pets, just napping among my flower beds. It's kind of adorable. And the best part is that this newsletter is totally free. So head to nerdwollet.com slash podcast to sign up. For the record, that's nerdwollet.com slash podcast. Come hang out with us. When you hear the words manufactured home, images of some flimsy trailer quivering in the wind in Tornado Alley might come to mind, but manufactured homes have come a long way and they might just be a key

to fixing the housing crisis. Welcome to Nerd Wallet's Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayola. Later this episode, we'll help you get ahead of a potential tax bill. Nobody wants those. But first, our weekly money news round up where we break down the latest in the world of finance to help you be smarter with your money. Our news colleague, Rick van der Knaifis here with a look at the housing market. Welcome back, Rick. Thanks for stepping in while Anna is on sabbatical.

We miss you, Anna, in case you're listening. Hey, thanks, Elizabeth and Sean. It's good to be back. Yeah, so many Americans feel priced out of the housing market, especially first-time buyers struggling to afford a starter home. We're watching a promising housing bill, the 21st Century Road to Housing Act, as it moves through Congress. In it, lawmakers are looking at new ways to make housing more affordable.

One idea of getting renewed attention is manufactured homes. Modern manufactured homes have come a long away from those flimsy trailers, those mobile homes made people picture. They're affordable, quick to build, and supporters say changing one obscure decades-old rule could make them even easier to build in more places. So could manufactured homes become a bigger part of the affordable housing solution? Let's get into it with mortgage writers Abby Badak Doyle and Kate Wood. Welcome back to both of you.

Hey, Rick. Happy to be here. Abby, let's start with the big picture. A lot of people still imagine manufactured homes as trailers. Is that what we're talking about here? No, definitely not. And when we say manufactured homes, we're not talking about trailers or campers or RVs. These are homes that are built to last. They just happen to start out in a factory. So quality-wise, the key date to remember is 1976. And that's when the Department of Housing and Urban Development established the HUD Code, which is a national set of, of safety and security standards for factory-built housing to build them to a higher quality. So this raised the bar on things like structural integrity, fire safety, energy efficiency, all that kind of stuff. Now that we have the HUD code, manufactured homes are kind of hard to distinguish from other site-built homes in the same neighborhood. So I actually have sort of a funny story

about that. About 10 years ago when my husband and I started our house hunt, we toured this super cute ranch. It was open concept, nice kitchen, it had a big full basement. And I genuinely didn't know it was a manufactured home until our real estate agent pointed it out. So at the time, I wasn't writing about housing. So consider me kind of like your average first time buyer. But I genuinely couldn't tell the difference that this was a manufactured home. I mean, I definitely would have thought the same. Like in my head, a manufactured home would not have a basement, let alone a Pittsburgh basement. So that's a whole other thing. But I think about that house all the time because like the price was right.

It was on 10 acres. And that was the busiest open house of any of the houses that we had walked through. So if these houses don't look like trailers anymore, what makes them different from other kinds of homes? So this is something that I like to get really nerdy about. So in terms of construction, your typical site built home, which spoiler alert, I already said site built. But so your typical site built home is what's called stick built. built means that it's built piece by piece. The sticks are usually literally the wood framing. Also, like I managed to bring up first, a stick built home also is generally a site-built

home. So every piece is assembled on site where the home is going to be located. So that's like a really super long way for me to intro what differentiates a manufactured home, which is really one key element. A manufactured home is built fully indoors in a factory. Then when it's completed, it gets transported to the building site. So under federal rules dating back to, again, that key year of 1976, watershed year for manufactured homes, right? So under that rule, a manufactured home has to be built on a permanent steel chassis. So basically it has a frame underneath the home that allows it to be put on wheels and

transported. So theoretically, you can pick up and move a manufactured home whenever you want. In reality, most of these homes are moved once. They are delivered to a site, and then that is where they live. they often get attached to a foundation. The vast majority are just staying put permanently. The Pew Research Center reported that only about 5 to 7% of manufactured homes are ever moved after installation. So again, if you're thinking trailer, if you're thinking, you know, this is something that's just going to up and go, really not that much.

But anyway, the steel chassis requirement is where the term mobile home comes from. And so that's the obscure rule that's now getting renewed attention from Congress. There's this growing argument that the requirement itself is outdated and it's just adding unnecessary cost to manufactured homes. So, Abby, how much money are we actually talking about here? Potentially a meaningful amount. So for starters, manufactured homes are already pretty affordable. Federal data puts the median price of a manufactured home purchased with land using a conventional mortgage at $245,000. The Niskin and Center estimates that removing that chassis requirement could shave another 5 to 10,000,

off of that already pretty affordable price. Wow, that's a pretty dramatic difference. Yeah, and changing the rule would also open the door to a lot more designs and style. So as you can imagine, it's somewhat limiting to design a home like on this big steel frame, right? And right now, most manufactured homes are in rural areas where you have a lot of space to transport and install these large sections. So like even for a single section manufactured home, that's a whole house, like up to 1,400 square feet for a single section, loaded up onto the back of a semi.

So you need a lot of space to maneuver that and install it, right? But without the chassis, you could more easily design a smaller multi-story home on a smaller footprint to fit like a tight lot, like in urban areas, for example. Changing the chassis rule would also start to blur the lines between manufactured homes and modular homes. So modular homes are also factory built, but they're in smaller sections that are then joined together at the building site. The chassis is a really big difference. The other difference is that modular homes are built to local building codes instead of to this nationwide HUD code. But still, like, this rule change for manufactured homes could really shake up the modular housing industry quite a bit,

potentially creating more competition. I think with this momentum and this visibility from this housing bill, manufactured homes could have like a long overdue rebrand moment. Mm-hmm. Yep. No, Abby and I have been saying from the beginning, these could be the tin fish of the housing market. Okay.

You're going to have to unpack that metaphor for me. Okay. So I say this with a lot of love because I am a major sardine stand. And Kate knows this. I actually have a sardine tattoo. So sardines have this reputation as like cheap, old fashioned survival food. Like they were very uncool. And then someone decided that they were cool.

And now they're trendy and they're everywhere. But they never lost what made them great in the first place is that they're affordable and they're practical. So even if the labels and the branding look a little more modern, like sardines are the same as they ever were. And in the same way, like, manufactured homes basically have already had their glow up. Like, we aren't talking about them. But oh my goodness, if you go online and look at some of these new manufactured homes, they look like they belong in one of those TikTok house tours where every room has gigantic windows and just like, perfect lighting for real. Like, so if like me, you are one of those people who just like swooned over mid-century homes in style and it's like, oh, if I could just have this perfect Palm Springs

home, this is how you could A, get that look, but also B, magically not have to deal with outdated systems and the previous owners deferred maintenance that they like looks like the 50s because they didn't update it since the 1950s. Even still though, like the stigma just hasn't caught up yet. People still think trailer. Yeah. And that's a stigma. stigma still shapes how a lot of people think about manufactured homes, including whether they hold value over time. One thing that surprised me in your column, Abby, was that manufactured homes can actually appreciate and value. That statistic was surprising to me, too, Rick. And that's also one of the biggest misconceptions. And one of the biggest factors in appreciation is whether you own the land underneath your home.

So this report is from realtor.com. And they found that manufactured homes on own land gained 70% in, value between 2019 and 2026. So that actually outpaced the price growth of traditional single-family homes, which grew more than 58% in that same time period. I mean, let's be clear, both of those figures are kind of freakish. Like 58% appreciation in seven years is also ridiculous. But, you know, it was a weird time. It's a weird time and we're not here to talk about home prices or at least not go super hundred at the moment. It's worth pointing out, though, that the weather you own the land aspect is really key here. So like not to nerd out again, but I mean like it's in our name, right? So not owning land is also a reason why condos tend to appreciate more slowly than detached single family homes. So with a condo,

you own your unit, but you don't own the land under it. Land is pretty much always going to appreciate and value over time, particularly if your area's population is growing, right? You can build more homes, but you can't make more land. So the slower appreciation isn't necessarily. even a manufactured home thing. Any home where you don't own the land beneath it, you're going to experience less appreciation. That's for sure. And going back to manufactured homes, some of that crazy price growth is driven by hot markets like the Sun Belt in Florida, where manufactured homes are really popular with retirees and they're very widespread in those areas. But still, that stat challenges this idea that manufactured homes automatically depreciate like cars, which is a, you know,

misconception that you may have heard. So the truth is in strong markets, affordable homes are in high demand and manufactured homes can appreciate and value just like any other house. So somebody wants to buy a manufactured home, how does the financing work? Big sigh. So unfortunately, financing is where things can get confusing fast. And wouldn't you know it, we are right back on the topic of land ownership. So let's say that you're buying a brand new manufactured home from a manufacturer. If the home is going to be permanently attached to land that you're either buying or that you already own, you can probably qualify for a conventional or government-backed mortgage for it. And it's the same thing if you're buying an existing manufactured home like the one Abby

looked at, right? So you can get, you know, a typical mortgage if the home and the land are a package deal. But on the other hand, if the home is going to be placed on leased land, like in a manufactured housing community, then the home itself is usually classified as personal property. So it's treated more like a vehicle than a house. In that case, buyers might need something that's called a chattel loan rather than a mortgage. And unfortunately, chattel loans tend to come with higher interest rates, shorter terms, and they also have fewer consumer protections than traditional mortgages. So one really big takeaway for potential buyers is that if you are buying a manufactured home from the manufacturer,

sure you really understand what kind of loan you're going to need, how the loan will work, and if you want to potentially get involved with buying land as a separate purchase before you make that manufactured home purchase. Got it. So, Kate, zooming out, if the chassis rule has been in place since 1976, why are lawmakers paying attention to this now? Well, I mean, hey, it only took 50 years, right? But, you know, over the decades, the affordable housing shortage has gotten so severe that

policymakers are increasingly looking for housing solutions that can scale more quickly and cost less. So manufactured housing is one of the few parts of the market where you can still find genuinely lower cost homes. To put it in perspective, so Abby gave us some numbers earlier, but let's like dig into that even more. So Fannie Mae reports that manufactured homes bought with land. So again, your sort of typical home purchase cost about 40% less per month than if you're buying a traditional site-built or stick-built home. So again, like Abby mentioned earlier, the median price of a manufactured home with land using a conventional mortgage is $245,000. If we look at the median price of an existing single-family home, right? So your sort of typical home that you'd

picture. According to April 2026 data from the National Association of Realtors, that median price was at $417,700. It's a pretty big jump, right? So assuming a 30-year fixed-rate mortgage at a 6.4% mortgage rate, which as we're recording this, that's roughly where we are right now. And you know what? We're going to do it 20% down payment, even though I know that's a stretch for a lot of people. But looking at what you'd be paying monthly for principal and interest with those two price points. So with the existing single family home, you'd be looking at like $2,000 a month versus for the manufactured home, a $1,200 monthly principal and interest payment. That's really significant savings. Abby, got any final takeaways for

listeners? Yeah, I think like Kate said, the biggest takeaway here is hope that a starter home can feel attainable again. I think for a lot of people right now, the traditional starter home just isn't financially feasible in the way that it was for their parents' generation or their grandparents' generation. And this like isn't a problem that you solved by cutting back on a couple of lattes and like tightening your budget. Like this is requiring bigger policy level thinking, including reexamining this decades-old rule about how manufactured homes are even built. So for some buyers, manufactured homes can offer a real path to homeownership that otherwise might not exist. And if you haven't looked at one in a while, they might be worth a second look. Awesome. Abby and Kate, thanks so much for

joining us. Thanks, Rick. I was happy to be here. Abby, Rick, Kate, I'm intrigued. I'm left with so many questions. Is my neighbor's house a manufactured home? In my lifetime, will I ever see a manufactured home on wheels? Will I see it? I want to see it being put into the ground. I have to head to YouTube after this. This was so engaging. Thank you. And maybe I'm going to end up living in a manufactured home. All right. Up next, we're getting into different ways to get ahead of an unexpected tax bill. But before we get into that, a reminder to send us your money questions. Maybe you want to know how to get your own manufactured home or you are still trying to figure out how to get into the housing market. Whatever your question is, leave us a voicemail or text us on the nerd hotline.

The number, if you forgot it, is 901 730-63-73. Again, that's 901-730 N-E-R-D. For the email lers, the email address is podcast at nerdwallet.com. We are also on Spotify. Yes, we do read your comments and we love them. So please leave a comment there also. And you can do the same thing on YouTube where you can subscribe. to watch every episode and see how beautiful all of us are.

In a moment, today's money question. Stay with us. If your investments are making you money, you could end up owing the IRS a penalty on top of your tax bill, just for not paying enough during the year. This week's money question comes from Colleen, who's trying to get ahead of it. Here's her question.

Bear with me, people. It's a long one. Hi, y'all. My husband and I both have investments that luckily have been making money the last few years, which is great. What's not so fun is not getting any tax refunds anymore and instead, owing money when it comes to tax season, as nothing is withheld from these accounts while they make money throughout the year. We are considering how to better prepare for next year's taxes and wondered

y'all's thoughts on two strategies. Number one, we have the option to select additional withholding of whatever amount we want with the companies we work at. The benefit of this would be a little less in each paycheck, but we don't feel it's so strongly all at once by owning the government on one day. And it spread out throughout the year instead. Option two, we could instead open a high-led savings account and put the money we aren't withholding into it throughout the year so that it grows even a little and we pay our taxes from this bucket. This would mean we still owe taxes from our investments when filing, but at least some of it could come out of interest we've made throughout the year. But then we would owe money on this

earned interest too, so then is it worth it? Similar potential future. The third option, if we have the money to dump in all at once instead of deposits throughout the year, we choose a CD that matures before taxes are due and deposit that chunk into there to grow. And again, have some of that interest covers some of what we will owe. But same question about paying on the earned interest here too. Would love your thoughts, Colleen. All right.

Well, shout out, Colleen. You really did your research with all of these strategies. So kudos to you. Your way ahead of the game here. To help us answer Colleen's question on this episode of Smart Money. we're joined by our tax and investing pro Bella Avila. Bella, welcome back to Smart Money. Hi, guys.

Thanks for having me back. So it sounds like Colleen's in a kind of good spot. Her investments are making money, which is what most people want their investments to do. But of course, investments in taxable accounts can trigger a tax bill. And this is in contrast to a non-taxable account. Think like your 401K, basically. And so getting a tax bill from your taxable investments can happen in a few different ways. Can you lay those out for us?

Yeah, so you're right. When you sell an investment for a profit, you'll owe taxes on your earnings. But like you mentioned, that isn't the only scenario in which someone might owe taxes on their investments. A few other common reasons are if you had interest or dividend income, and even if your dividends were reinvested, that's true. And then if you're invested in a mutual fund, you may also owe capital gains tax, even if you don't sell anything. And that's because if the mutual fund manager sells securities in the fund, your share of that profit is technically considered a capital gain. And for some people, they may not find that they owe taxes until they get a form from their brokerage account or whoever they're working with come, you know, January or so at the beginning of the year. They may not even know that they might owe taxes on dividends that are reinvested. And that can be an unfortunate surprise. Yeah, very unfortunate. All right. Let's talk through each strategy, Colleen mentioned. And we're going to start first with withholding extra from their paychecks.

Now, this is something I personally do to cover my business taxes every year. Bella, explain how this works. So if you find that your full tax liability isn't covered by what your employer takes out of your paycheck, and in plain English, that just means you owe more taxes than you're paying throughout the year. You can tell them to withhold more tax on future paychecks by submitting a new W-4 form. And if you don't want to go the W-4 route, you can also send estimated tax payments to the IRS yourself. For the record, you can pay estimated taxes a couple of ways. One is you can use direct pay, and that entails going through the IRS website and paying with your bank account.

Pretty straightforward. Or if you like going to the post office, you can mail a check with a payment voucher using Form 1040 ES. All right. So Bella, how can Colleen and her husband calculate the right amount to withhold? I personally found this a little tricky. It may be hard because they can't predict investment, performance, or growth. If we could have it our way, the market would just keep going up. but they can look at whether their investments are composed of long-term versus short-term capital gains, right?

Yeah, like you said, this is where it gets pretty tricky since not all investment income is taxed the same. I think I could spend this entire segment talking about the nuances of interest in capital gains and dividends and how they're all taxed, but I won't put you all through that. I will say that I think it makes the most sense to withhold extra on your W-4 if you have pretty stable investment income. And in that case, I would lean on prior year 1099s and last year's tax return to see how much tax I owed on my investments and get a rough idea of how much extra to withhold. But just keep in mind that if you continue to put money in these investments throughout the year, your investment income could increase. And then it might make sense to withhold a little bit extra than you think you need to. At the same time, there's always going to be a little bit of guesswork involved because as you mentioned, a mutual fund manager might sell some stocks in the portfolio and then you would be liable for some. potential taxes from that. So do your best based on the information that you have in the past,

like Bella mentioned, using maybe a prior year's return, but just know that it's probably not going to be perfect. So Bella, can you tell us more about adjusting your W4 to withhold taxes? There are two ways to do this. You can input the amount into the other income section of your W4 or the extra withholding section, right? Yeah, let's break those differences down. As an example, let's just say I made $5,000 from my investments last year and expect to net about the same. this year, I could put $5,000 on step 4A other income, and my employer would withhold my highest ordinary tax rate on that income. Okay, and so with this method, you don't really have to worry about calculating the actual taxes you might owe, right? Yeah, that's right. Your employer

kind of does all the work for you. They'll do the math and withhold everything. But the key thing here is that not all investment income is tax the same as your ordinary income, which is what your employer will withhold. So let's talk about that second option you mentioned, step 4C, extra withholding. This section lets you put the exact amount of tax you want withheld each pay period. It does require some math on your part, but it might give you a higher shot at accuracy. And then I do want to plug the IRS's withholding estimator here, which can help you with your calculations. It has fields for you to enter your interest income, dividend income, short-term, and long-term capital gains. And at the end, it even spits out a mostly pre-filled W-4 for you, which I think is pretty handy.

But just keep in mind that you might want to revisit it throughout the year to avoid over or under-withholding. your taxes. Bella, to me, it sounds like this extra withholding option is kind of like the W4 version of estimated payments then. Yeah, you can totally think of it that way. I would just say that estimated tax payments give you a little bit more flexibility. You can change the amount and cadence on your terms, whereas you'd have to submit a new W4 to your employer each time you want to make a change to your withholding. Yeah. What I'm hearing here is it sounds like it could be easy to miss the mark with all of this guesswork sometimes. I remember that I attempted to to use the IRS calculator, and as soon as I opened it, I closed it and message my tax person.

There were too many boxes and numbers for me. I was going to say, if you don't feel like doing all this, you might want to hire a CPA or some other kind of tax professional because this is a lot of heavy lifting and numbers to crunch on your own, and you don't want to do it wrong. Yes, totally. It can get complicated quickly. Yeah, don't want no smoke with the IRS. Well, my tax expert personally told me to withholds, I don't know, an extra maybe $500,

and I haven't underpaid since. Works for me. You've actually got a massive refund this year. So maybe you're over with holding Elizabeth. I may be, but I haven't got hit with an overpayment penalty. So I don't know. Where are we? There you go.

I guess, yeah, that's the question is, would you rather overpay now and get a good refund or, you know, avoid that penalty? It's always interesting. And we're not going to go down that rabbit hole right now with this argument that, you know, if you overpay, then you're giving the IRS a free loan. That is true. But I also like a bulk cash. Okay?

I love that. So, you know, each their own. I'm in the same boat. I'm right there with you. I get it. As someone who owes almost every single year, I actually upped my withholding this past year because I'm hoping to kind of mitigate some of what I will end up owing maybe this coming year. And I would just really like a refund because it feels nice to get a windfall, even if it's just a few hundred bucks.

Amazing. So Bella, getting back to the topic at hand, instead of having to constantly adjust a W-4, do you think estimated taxes might actually be the easier route? I think it's definitely something to look into instead of, tweaking your W-4 specifically for one-off situations. For example, if I sold some stock for a profit and owed capital gains tax on my earnings, I'd probably just estimate the tax I owe using a capital gains tax calculator and then send it as an estimated tax payment to the IRS, since that's not really recurring income that I'd want my employer to withhold taxes on. Okay, moving on to Colleen's

second strategy. Let's talk about saving money for taxes in a high-old savings account to earn some interest before giving that money over to the IRS. And I really like this strategy because that way you have a little more control over the money that you're keeping in your accounts. But like Colleen said, they might actually end up owing taxes on the interest they're earning in this account. So then they would have potentially a larger tax bill. Yeah. So unfortunately, I do have to poke some holes in this idea. If the plan is to calculate how much extra tax you owe during the year that's not being withheld and then divide that up into monthly contributions to a high-yield savings account, it's honestly not my favorite strategy.

Colleen asks if the interest is taxable, and it is, but that's not really a deterrent, in my opinion. The main thing I would be concerned about is the IRS is the underpayment penalty. When you file your taxes, if you owe more than $1,000 and you're withholding from your job or estimated tax payments throughout the year, didn't cover at least 90% of the tax you owed for the year or 100% of the tax you owed for the previous year, you'll get hit with a penalty, which right now is 6%. and for high earners, the rules can be even stricter. So let's just say you ended up with a $3,000 tax bill last year, but you decided to keep your withholding the same this year

and not make estimated tax payments. If you stashed $250 a month in a high-yield savings account earning 3% to 4%, you could still face that 6% penalty for underpaying your taxes, which kind of cancels out any interest you would earn. In my opinion, this seems like more of a headache than it's worth. And if you've already done the math on how much extra you need to withhold for the year, you'd probably be better off just tweaking your W4 and not having to stress about it. Yeah, the IRS wants their money like today.

So do you not underpay that. Yesterday, if they could have it yesterday. Yeah. Have either of you ever been hit with an underpayment penalty? I have not, although the amount that I owed this past tax season made me up my withholding because I was a little concerned that this coming year's tax season, I actually would maybe have an underpayment penalty. And this is because my tax situation changed a lot over the past year I got married.

I'm renting out a house. Now I have some investment income and I just didn't want to take the risk. So I upped my withholding again so I can hopefully maybe one cover my tax bill and two possibly get a refund. I would just like to have a refund for once. I'm the same where I haven't been hit with it before. But I think it definitely takes some effort on my part to make sure I'm on track to owe as close to zero as I can at tax time. For example, I'm pretty picky when it comes to what I invest in to make sure whatever I choose doesn't lead to a surprise tax bill. Thank you guys for sharing your business. Time for you to share yours, Elizabeth.

I was not hit with an underpayment penalty because luckily my withholding was enough, but I have shared, I believe, on the podcast before, that my first year in business, I was not paying quarterly estimated taxes. But luckily, I wasn't earning a lot of money that year. So I didn't get hit with an underpayment penalty, but almost. Yeah, it's hard to figure all this stuff out, right? All right, back to the high-yield savings account option. It sounds like even if Colleen stashed away money in that high-yield savings account

and made those estimated tax payment. She could avoid the underpayment penalty, but it just doesn't sound like she would make that much an interest quarterly anyway. But Colleen, it's up to you to decide whether it's worth the stress. Quick aside, my cat just bit me while we were recording. So I'm sure...

You were very calm. Well, I did flinch, but hopefully it's not too obvious. Yeah, he wants to be on my lap because it's cool and rainy today. Well, maybe our listeners and viewers need to know that too. Yeah. Okay. For people who are only listening, head to YouTube or Spotify and watch my cat bite me in this episode. It's a cute cat, even though a bite. He's very cute, but sometimes a jerk. Anyway, let's move on to the final option here,

which is using a CD, a certificate of deposit, to stock away money until tax time. And this sounds like a slightly, maybe more rigid version of the high-old savings account strategy because you wouldn't be able to access that money until the CD term is up without potentially losing your interest. and maybe a fee would be thrown in there too. So Bella, what are your thoughts on this? Kind of same thing as the high-old savings account. I'd be concerned about the underpayment penalty again. And then kind of like you were saying,

CD feels even riskier than a high-ield savings account to me since you lose that withdrawal flexibility. If your money's locked up in a CDN's till maybe March of next year, but you realize you need to make estimated tax payments throughout the year to avoid the underpayment penalty, you might be in kind of a tough spot. Yeah, that would be a tough spot to be in. Colleen, what are you going to do? please tell us, write us, if you're listening, please. But before then, are there some hybrid options that Colleen can try? Anything that we haven't covered, Bella?

Yeah, I think a hybrid approach like tweaking your W-4 and sending an estimated tax payments could make sense if you're dealing with different kinds of investment income, like steady monthly dividends and then the occasional big capital gain. But at the end of the day, like you guys were mentioning, working with a tax pro if you can to figure out the right approach could definitely make sense because this stuff can get complicated. Yeah. And again, you do not want to be on the wrong side of the IRS and end up owing the money because they can get expensive and just give you a whole other headache you don't want to deal with. Yeah. So let's actually talk about lowering your investment tax bill. What options might Colleen have here? There are a few things that come to mind for me. The first thing being try to hold on to your investments for over a year. If you can, this could bring you down to the long-term capital gains tax rate, which is more favorable. Yeah, that's a good thing to mention. And one thing I want to clarify, too, is we've been talking about capital. capital gains taxes and there's short-term and long-term capital gains. And I think people don't understand that short-term capital gains tax is just your ordinary income tax rate. And the long-term

tax rate is going to most likely be much lower than what you'd pay on your ordinary income. Yeah, that's right. And then moving on to the second thing I wanted to mention, I'd also encourage people to look into investments with more favorable tax treatments like ETFs if taxes on mutual funds feel like a burden. Or maybe see if keeping your investments in a tax-advantage retirement account could make sense for you. A quick clarifying question. Can you talk about why ETS would actually be preferable to mutual funds tax-wise here? So with an ETF, you won't actually pay capital gains tax until you sell your shares, whereas like I mentioned with a mutual fund, the manager can sell shares and you might not know until tax time. Got it. Okay. Thank you.

And then the last thing I kind of want to talk about is you might want to look into tax loss harvesting, which is a strategy where you sell certain assets at a loss to offset your gains. A lot of robo advisors actually offer the service and for free sometimes. Man, every year I say, I'm going to look into my tax loss harvesting and save money on my taxes. Do you guys think I've done it yet? I'm going to guess no because you said this, but hey, you can carry your losses forward, so you might not have wasted those losses yet. Yeah, that's the part I like, you know, just saving. That's all this is. All right. It feels like ultimately Colleen and her husband hate the idea of giving their cash straight to the IRS and they want to try to make some interest on their money first.

I feel you, Colleen. I too hate giving chunks to the IRS. I too hate it. Yeah, I totally get why people feel that way. But in the U.S., taxes are pay as you go, so you have to pay them while you earn the money, or like we talked about, you might get penalized. So I think implementing tax-saving strategies

where you can is the safest move. And then if you have extra income left over, once you've covered all your bases each month, that's what I would recommend using to help you build wealth and interest-bearing accounts. Well, Bella, thank you for, coming on and educating us on taxes, and we hope Colleen has gotten her question answered. Yeah, thank you guys for having me. I hope it was hopeful.

It's also a good reminder that it's never too late or honestly even too early to start strategizing for the next tax season. Yes. Okay, well, that's all we've got for this episode. Remember that we're here to answer your money questions, so send them our way. You can hit us up on the Nerd Hotline, text us or leave a voicemail at 901-730-6373. That's 901-730 nerd. You can also email us at podcast at nurdwob.com or drop us a comment on Spotify or YouTube.

Yeah. And if you have some strategies that you've been using during tax season that you want to share, you can send us an email or leave a comment, as Sean said. All right, join us next time to hear about how to set up a sinking fund because we are getting organized this year. Follow smart money on your favorite podcast app that includes Spotify, Apple Podcasts, and IHeartRadio to automatically download new episodes. Here's our brief disclaimer. we are not your tax, financial, or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

This episode was produced by Tess Figland. Hillary Georgie helped with editing. Eve Progman edits our audio and our video. And a big thank you to NerdWallets editors for their help. And with that said, until next time, turn to the nerds.