Selling strategy

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russellh
Posts: 57
Joined: Thu Sep 12, 2013 10:30 pm

Selling strategy

Post by russellh » Mon Nov 13, 2017 10:05 pm

After many years of accumulating, I need to sell some funds to finance a new home purchase.

Vanguard shows that I have approx. $130,000 in unrealized gain. If I liquidate these funds, do I pay estimated quarterly tax on the $130,000? How much? Is it 20% capital gains tax?

Is there some other strategy I should be thinking about?

PFInterest
Posts: 394
Joined: Sun Jan 08, 2017 12:25 pm

Re: Selling strategy

Post by PFInterest » Mon Nov 13, 2017 10:20 pm

Do you have to sell it all this year?

russellh
Posts: 57
Joined: Thu Sep 12, 2013 10:30 pm

Re: Selling strategy

Post by russellh » Mon Nov 13, 2017 11:34 pm

PFInterest wrote:
Mon Nov 13, 2017 10:20 pm
Do you have to sell it all this year?
Not necessarily. It could be half now and half in January, depending on escrow timing.

TheGodson
Posts: 3
Joined: Wed Aug 16, 2017 4:27 am

Re: Selling strategy

Post by TheGodson » Tue Nov 14, 2017 3:01 am

Your capital gains tax is determine by how long you've held your position. If it has been longer than a year then you are subject to long term capital gains tax. If it has been less than a year then you are subject to short term capital gains tax.

Short term capital gains tax is the same as your income tax. Long term capital gains tax is either 0%, 15%, or 20% depending on which tax bracket you are in. 0-15% = 0%, 25-35% = 15%, 39.6% = 20%.

Long story short, long term capital gains are better than short term.

p.s. capital gains is treated as if it was in addition to your income, your income is calculated first. Example: Let's pretend you made $40,000 this year in income and earned $60,000 in short term capital gains. Of your income, $18,650 is taxed at 0%, the other $21,350 is taxed at 15%. With the capital gains, $35,900 of that $60,000 would be taxed at 15%. The other $24,100 would be taxed at 25%.

Ron Scott
Posts: 360
Joined: Tue Apr 05, 2016 5:38 am

Re: Selling strategy

Post by Ron Scott » Tue Nov 14, 2017 2:07 pm

Godson is right, and the complications mount as you may need to declare “which” share you sold. I understand the details and I usually work them up on a spreadsheet. But I email my tax accountant with most issues like this just to be sure. A second set of eyes is cheap compared to a tax mistake.

Good luck with the house!

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