What to do with proceeds from sale of 2nd property?

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Topic Author
WorkingToFI
Posts: 2
Joined: Tue Nov 17, 2015 6:30 pm

What to do with proceeds from sale of 2nd property?

Post by WorkingToFI »

Hi,

I recently sold our cabin that we had for a little over 7 years.

Bought it for $140k in March 2014, and sold it for $320k in July 2021. After realtor/title fees I ended up with $295k.

It was not a rental property so I don't think I can 1031 the proceeds.

I only put about $20k into the property building a retaining wall, and some small interior upgrades (water filter, hand rail, electrical work, etc)

So, I'm assuming I'll owe IRS on a capital gain of $135k next April.

This is my first time selling anything of this magnitude!

Two Questions:

I want to hold money for expected taxes. Looking for a safe money market or something similar through Fidelity that might pay 0.5%. Any suggestions?

We're in 24% Income Tax Bracket, Does $40k seem like a reasonable amount of money to hold for taxes on that gain?

(I'd like to claim a smaller gain, but from what I've read I don't think I can deduct the property taxes, HOA fees, or other expenses I had on the vacation property. Probably should have tried to rent it out more than I used it the last couple years so I could do a 1031, but I want to simplify my life, so thinking I'll just have to suck it up and pay the capital gains...)
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Duckie
Posts: 8307
Joined: Thu Mar 08, 2007 2:55 pm

Re: What to do with proceeds from sale of 2nd property?

Post by Duckie »

WorkingToFI wrote: Wed Jul 21, 2021 5:13 pm We're in 24% Income Tax Bracket, Does $40k seem like a reasonable amount of money to hold for taxes on that gain?
The 24% federal tax bracket means your long-term capital gains tax is 15%. 15% of $135,000 is $20,250. Plus you may have state capital gains taxes. Setting aside $40,000 seems high, but it depends on your state rate. I know in California it's 9.3% plus NIT.
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