Can we avoid taking a tax bath?

scaeagles · 08-29-2005, 04:11 PM

Well, probably stating the obvious here, but if you sell a home, you have two years to reinvest the profits from the home without having to pay capital gains taxes on that money.

I also know that you can move money between retirement accounts without paying any penalties (as in closing one, taking the money, and putting it elsewhere that qualifies as a retirement account).

However, when I purchased my house, I got no breaks for the money I put down. This money did not come from the market, but from earnings. It would seem that since you are making a profit from the sale of stock, which has nothing to do with retirement and is not from the housing market, that you are screwed and will pay capital gains taxes on it.

I am curious, though. Capital gains rates are a flat rate, are they not? And I thought they were 28%. How is it, then, based on your OP, that your effective rate is 40%? Tax law changes all the time, but I thought stock options were typically offered because of their tax advantage - it is not deemed as work related income, and liquidation would then only require capital gains taxes, with no medicare or social security taken out.

I am not a tax lawyer, so I am sure everything I have stated is WAY out of date.

Ghoulish Delight · 08-29-2005, 07:22 PM

Quote:

Originally Posted by scaeagles

I am curious, though. Capital gains rates are a flat rate, are they not? And I thought they were 28%. How is it, then, based on your OP, that your effective rate is 40%? Tax law changes all the time, but I thought stock options were typically offered because of their tax advantage - it is not deemed as work related income, and liquidation would then only require capital gains taxes, with no medicare or social security taken out.

According the ETrade page, they will indeed be witholding federal, state tax, SDI, medicare, and SS. Those are 25%, 9.3%, 1.08%, 1.45%, and 6.2% respetively. Don't ask me why it falls under all that instead of just CG.

Perhaps you're thinking of an employee stock purchase plan vs. a stock option. My company offers both, this is a stock option.

08-29-2005, 04:11 PM	#1
scaeagles I LIKE! Join Date: Jan 2005 Posts: 7,819	Well, probably stating the obvious here, but if you sell a home, you have two years to reinvest the profits from the home without having to pay capital gains taxes on that money. I also know that you can move money between retirement accounts without paying any penalties (as in closing one, taking the money, and putting it elsewhere that qualifies as a retirement account). However, when I purchased my house, I got no breaks for the money I put down. This money did not come from the market, but from earnings. It would seem that since you are making a profit from the sale of stock, which has nothing to do with retirement and is not from the housing market, that you are screwed and will pay capital gains taxes on it. I am curious, though. Capital gains rates are a flat rate, are they not? And I thought they were 28%. How is it, then, based on your OP, that your effective rate is 40%? Tax law changes all the time, but I thought stock options were typically offered because of their tax advantage - it is not deemed as work related income, and liquidation would then only require capital gains taxes, with no medicare or social security taken out. I am not a tax lawyer, so I am sure everything I have stated is WAY out of date.
	Submit to Quotes