Avoiding tax underpayment penalty after incurring significant long term cap gains on stock in 1st quarter of 2024

[LeoNYC1]

I am buying a home in March 2024, and will need to sell a big chunk of my mutual funds in Jan/Feb of 2024, incurring around 180K in long term capital gains (in my tax bracket the long term cap gain tax rate is 15%, so that's 27K in additional federal tax).

Question: can my wife and I simply increase the paycheck withholding significantly at work to make sure they deduct around 27K more for both of us throughout 2024 (so about 2.2K more per month)  to avoid paying the underpayment penalty 2024 when we file taxes in 2025?

Or

We must deal with the quarterly pre-payment of taxes, which seems more annoying/painful for me, especially since I would rather not spend any large sums of money in early 2024, as I need to repair/paint/furnish the new home.    

[Mike9241]

Whether increasing your withholding is sufficient is unknown. It actually may not be necessary if you don't object to owing when it comes time to file your 2024 return in 2025.

the safe harbor rules. NOTE the following is based on the tax law as currently written. It is unlikely that these rules will be changed for 2024 but could change in the future. 

 There will be no federal penalties for not paying in enough taxes for 2024 if withholding and:

1. timely estimated tax payments equal or exceed 90% of your 2023 tax or
2. timely estimated tax payments equal or exceed 100% of your 2023 tax (110% if your 2023 adjusted gross income is more than $150K) or
3. the balance due after subtracting taxes withheld from 90% of your 2023 tax is less than $1,000 or
4. your total taxes are less than $1,000

state laws differ

since you expect your 2024 taxes to exceed your 2023 taxes, number 2 would be a safe option, but you could end up owing, maybe a lot but penalty-free, when filing your 2024 return. 

also note that if your Modified Adjusted Gross Income for 2024 is over $250K you may end up owing an additional 3.8% Net Investment Income Tax on the smaller net investment income or MAGI over $250K. See Form 8960.

[LeoNYC1]

Thank you. To clarify: our AGI will be above 250K. Also, assuming this option:

"Timely estimated tax payments equal or exceed 100% of your 2023 tax"

What does this mean exactly?. instead of filling in 2025, I should file and send money to IRS every quarter, including in Q1 2024 after selling the funds? Or, simply increase our withholdings enough to cover 110% of the tax we paid in 2023 and that would allow us to avoid the underpayment penalty?

Also, we will certainly incur the net investment tax mentored because our AGI will be above 250K for both 2022 and likely for 2024. Any way to minimize or avoid that tax? Do I need to pay that one quarterly?