Thanks for writing back!
Yes wife is also working part time so no problem there with income. We could fund with earned income, but it's probably best to work towards maximizing her 401k instead (even though she gets minimal match and high fees and we're in the 15% bracket with all our deductions right?)
I'm just sort of uncomfortable with this account given the tax accounting complexities, every quarter adds a new basis and at the end of the year the amount of taxable gains seems totally random.
If I understand this correctly, the taxable gains you have been seeing are from trades made by the fund managers of your mutual fund. They
are totally random, because they decide when/if to trade. Actively managed funds can have more trading, while index funds generally have little trading - by definition they are copying the makeup of an index. So, what is in your taxable account? Perhaps you should assess which funds you have where.
You need to take a bigger picture view of your entire stash: taxable, pre-tax, post-tax. Having a mix of different accounts with different tax treatments gives you flexibility. Personally, I wish we had more in a taxable account, but we've been trying to max out all our tax advantaged accounts on a low income and there's nothing left for taxable. Throw in college financial aid rules, and it is tricky. You need to project out a bit to see how YOUR circumstances might play out - stash building, Roth pipeline, ??