A very easy LTCG question for you guys...

[rmcelwee]

SOLVED - A very easy LTCG question for you guys...

EDIT - This has been solved. I used the IRS calculator that RunningBum linked below. Total taxes for $500K was $66,012. Total tax for $1M was $179,365. Thanks!!!


I've never done a huge withdraw before and I have always had a regular job with taxable income. I just want to check my math. I sell stock in 2024 and have $500K in LTCG. No additional income, no state tax, this is all the money I have for the year:

$500K - $29,200 (standard deduction) - $94,050 (0% LTCG rate) = $376,750

$376,750 @ 15% LTCG rate = $56,512 total taxes

OR if I have $1M in LTCG:

$1,000K - $29,200 (standard deduction) - $94,050 (0% LTCG rate) = $876,750

$583,750 - $94,050 = $489,700 @ 15% LTCG rate = $73,455
$876,750 - $583,750 = $293,000 @ 20% LTCG rate = $58,600
$73,455 + $58,600 = $132,055 Total tax for the year

Is my math/thinking correct?

BTW, in case you were wondering, this money will be used to build our dream home on our new property (assuming the market continues going up).

 

[RunningBum]

NIIT at 3.8% will be triggered at some point, and you may go into 20% cap gains too.

See for yourself: https://www.irscalculators.com/tax-calculator

 

[GrayHare]

at those amounts I think you'll be subject to NIIT https://www.irs.gov/taxtopics/tc559

 

[rmcelwee]

NIIT at 3.8% will be triggered at some point, and you may go into 20% cap gains too.

See for yourself: https://www.irscalculators.com/tax-calculator

Thanks! I corrected the 20% tax. I did not think about NIIT. I will look at your calculator and adjust my original post.

 

[ncbill]

EDIT - This has been solved. I used the IRS calculator that RunningBum linked below. Total taxes for $500K was $66,012. Total tax for $1M was $179,365. Thanks!!!


I've never done a huge withdraw before and I have always had a regular job with taxable income. I just want to check my math. I sell stock in 2024 and have $500K in LTCG. No additional income, no state tax, this is all the money I have for the year:

$500K - $29,200 (standard deduction) - $94,050 (0% LTCG rate) = $376,750

$376,750 @ 15% LTCG rate = $56,512 total taxes

OR if I have $1M in LTCG:

$1,000K - $29,200 (standard deduction) - $94,050 (0% LTCG rate) = $876,750

$583,750 - $94,050 = $489,700 @ 15% LTCG rate = $73,455
$876,750 - $583,750 = $293,000 @ 20% LTCG rate = $58,600
$73,455 + $58,600 = $132,055 Total tax for the year

Is my math/thinking correct?

BTW, in case you were wondering, this money will be used to build our dream home on our new property (assuming the market continues going up).

I'd go for a mortgage loan based on assets in your portfolio.

more expensive than a traditional mortgage but far cheaper than paying the taxes.

 

[rmcelwee]

I'd go for a mortgage loan based on assets in your portfolio.

more expensive than a traditional mortgage but far cheaper than paying the taxes.

The last time I looked at that the girl at the bank worked out the loan for me and told me I would be required to withdraw $280K per year from my 401K to qualify for the loan (our living expenses are around $40K). I might check on that again but we don't have any debt and don't really wish to. Also, there are probably a lot of benefits (can't think of any offhand at the moment) to not messing with banks and such when building a house. Thanks for the suggestion, it will give us something to think about.

 

[xlf11]

You would need to find bank/CU/mortgage broker willing to use "Asset Depletion" method to qualify you using asset (plus income) instead of income alone.

 

[RE2Boys]

The last time I looked at that the girl at the bank worked out the loan for me and told me I would be required to withdraw $280K per year from my 401K to qualify for the loan (our living expenses are around $40K). I might check on that again but we don't have any debt and don't really wish to. Also, there are probably a lot of benefits (can't think of any offhand at the moment) to not messing with banks and such when building a house. Thanks for the suggestion, it will give us something to think about.

Some 25 years ago I had a custom home built just the way we wanted it. Since I was paying cash, there were no financial hoops involved. I already owned the lot free and clear, no further surveys needed, no appraisals, no origination fees, no points, no title searches, no title insurance issues. Much of those items were covered with the original lot purchase. I fully controlled when and how much the progress payments to the builder, per the contract provisions.


That said, you still needed to follow local laws and provisions. Very important to select a contractor that is very up front regarding contract changes, pricing, and will work with you. Virtually no closing costs.


But as others may have pointed out, using a mortgage allows you to own using other people's money and leverage your assets, allow them to grow while slowing paying for your home. Many times I visited the possibility of obtain a mortgage and in hindsight, it would have been a good financial move 5-8 years ago.


But I had the peace of mind that, at the time I left my career job, we had our home without any worry about meeting the large monthly payments.

 

[rmcelwee]

But as others may have pointed out, using a mortgage allows you to own using other people's money and leverage your assets, allow them to grow while slowing paying for your home.

And that is the rub. Mathematically it is often good to have a mortgage. I just asked my wife "Hey, do we want to get a mortgage?". "Hell no" was her response. The issue has been settled.

 

[ncbill]

The last time I looked at that the girl at the bank worked out the loan for me and told me I would be required to withdraw $280K per year from my 401K to qualify for the loan (our living expenses are around $40K). I might check on that again but we don't have any debt and don't really wish to. Also, there are probably a lot of benefits (can't think of any offhand at the moment) to not messing with banks and such when building a house. Thanks for the suggestion, it will give us something to think about.

so don't use your local bank.

plenty of other mortgage lenders out there.

again, not as cheap as a traditional loan but still less than paying federal LTCG tax @ 15-20%, especially if you are subject to the NIIT surcharge.

heck, even a margin loan should be cheaper.

 

[rmcelwee]

so don't use your local bank.

plenty of other mortgage lenders out there.

again, not as cheap as a traditional loan but still less than paying federal LTCG tax @ 15-20%, especially if you are subject to the NIIT surcharge.

heck, even a margin loan should be cheaper.

$1.2M 30 year at 8% = $2M in interest. Payments of $9K per month. I'll still have to pay LTCG tax because my income is negative ( -$1200 per month ). I don't have money to live on and I don't have money to pay the mortgage. I know we could crunch numbers, include inflation, etc and come up with a better scenario but I'm still not SURE I want to mess with a bank. I KNOW I don't want to mess with my wife who said just pay cash for the house.

 

[RunningBum]

Consider selling some before the end of this year and the rest next year (if that is your time frame) to limit the amount at 20% and 3.8% NIIT.

 

[rmcelwee]

Consider selling some before the end of this year and the rest next year (if that is your time frame) to limit the amount at 20% and 3.8% NIIT.

Thanks! That is our gameplan. I have a 2XS&P stock that is up 400% that has been slated to sell on one of the two last trading days of the year.