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Post by aaplcrazie on Jul 17, 2022 12:59:20 GMT -8
Hi All,
So i think my arm has been twisted to sell some AAPL for a 1st time Property Purchase. Initially will be selling a bit for a down deposit and then a chunk for principal.
Am asking for any thoughts or Best Practices of ways to go about this IE the Selling - all at once in smaller lots? And implications in terms of Uncle Sam etc...
(This is not my area of expertise so feel fee to explain it to me like I was 5)
Thanks,
The Crazy One.
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macster
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Post by macster on Jul 17, 2022 19:23:35 GMT -8
Hi All, So i think my arm has been twisted to sell some AAPL for a 1st time Property Purchase. Initially will be selling a bit for a down deposit and then a chunk for principal. Am asking for any thoughts or Best Practices of ways to go about this IE the Selling - all at once in smaller lots? And implications in terms of Uncle Sam etc... (This is not my area of expertise so feel fee to explain it to me like I was 5) Thanks, The Crazy One. Well…this is what I did. At age 69 I wanted to sell enough to pay cash for this property but most of my fruit is locked up in an IRA which if withdrawn would have put me in the 37% income tax bracket. So I sold all my individual account and paid 15% capital gains taxes for a huge down payment. Set up a distribution from my IRA to qualify for a ten year 3.75% mortgage, a sort of bridge loan, for the remainder of the property. Then I would use the proceeds from the sale of my old property to recast the mortgage reducing my mortgage payment in half. Then from there I can do whatever I want. I can pay off the mortgage little by little to stay in a lower tax bracket to keep from paying big income taxes to the IRS with IRA money. I can reduce the monthly distribution from my IRA or keep the monthly distribution and buy more aapl in the individual account. Instead of recasting the mortgage with the proceeds from the sale of my home I can buy more in an individual account and payoff the mortgage monthly over a longer period. Many options to choose and I haven’t yet decided what course to set.
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Dave
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"It's tough to make predictions, especially about the future." Yogi Berra
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Post by Dave on Jul 18, 2022 2:24:32 GMT -8
Something to keep in mind. If you are on Social Security you will be penalized. The money that you withdraw from your IRA will be taxed as earned income which of course puts you into a higher income bracket, If you and your wife file jointly both of your SS checks will be reduced accordingly. This will continue for as long as your adjusted gross stays in the higher bracket. Trust me, it hurts. Macster has a great plan as it provides him with future options that he can adjust as needed. And keep in mind that this housing market is over inflated and is in a down trend. Don’t settle for less than what you truly want as a do over can be very costly.
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macster
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Post by macster on Jul 18, 2022 3:27:50 GMT -8
Something to keep in mind. If you are on Social Security you will be penalized. The money that you withdraw from your IRA will be taxed as earned income which of course puts you into a higher income bracket, If you and your wife file jointly both of your SS checks will be reduced accordingly. This will continue for as long as your adjusted gross stays in the higher bracket. Trust me, it hurts. Macster has a great plan as it provides him with future options that he can adjust as needed. And keep in mind that this housing market is over inflated and is in a down trend. Don’t settle for less than what you truly want as a do over can be very costly. Thanks Dave. Yes I forgot to mention the Social Security aspect although it’s a known issue with all retirees who are required to take their Required Minimum Distributions from tax deferred accounts at age 72. The way around paying taxes on your SS is if you have a Roth IRA.
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4aapl
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Post by 4aapl on Jul 18, 2022 11:05:47 GMT -8
Margin can be your friend, if you have a good rate and don't get too risky. We "borrowed" some that way on our first house, buying in cash since it was a foreclosure, bought on the court house steps. At the time in 2007 that meant we got it for a 30% discount over retail. In the coming years, that meant that the housing dip only took the value to just slightly below what we paid for it.
On our 2nd purchase in the middle of 2010, we were still borrowing and I didn't want to get too risky by borrowing too much, especially with 2008-2009 in recent memory. Instead, we sold shares. But I hedged our bets, buying options, enough to cover the same gains over the coming 1.5 years if AAPL did reasonably well. I forget the exacts, but it worked out well since AAPL went up.
(EDIT: FWIW we bought this one off-market too, when the owner held a public auction, after he was tired of holding it while prices kept getting lower. We also got it for about a 30% discount from retail)
Taxes do take a bite, but LT capital gains are decent, even if they scale up. 0%/15%/18.8%/23.8%. That 0% is really great when you can hit it.
On timing, you're right that spreading out sales over a couple days or weeks helps even that out.
If you do end up taking a big tax hit, especially at standard rates, consider making donations. While that includes household items and such, this is also a time to consider making bigger cash donations, if it is something you already do or are considering. You can make them all this year if you want. But you can also use a charitable trust, which lets you put in a larger chunk now, and get the deduction now, but make the donations over years. There is an annual fee (1.6%?). But the second great thing about this method is that you can donate stock you have held long term, and get the full current value as a deduction.
Normally you'd sell some shares and owe taxes on the proceeds, and then you could make a donation. So if you had stock with a basis of $50, and sold it at $150, you'd owe taxes on $100. Using 20%, you'd owe $20, so have $130 left over. You could then donate that, but you'd only be donating $130, and only deducting $130 (if itemizing).
Instead with the charitable trust, you'd not owe taxes, and have the full $150 into your charitable trust account, which you could then donate. That 1.6% fee is annualized, so if you made your donations right away there would be nearly no fee. There are minimums, possibly that donations have to be at least $250. It takes a week or so, so this is different than just giving money directly, but as long as they are a 501 C (or something, basically an official non-profit) it works. And you can choose to have the money invested while it is sitting in the charitable trust, though until high levels they generally just have a few options, similar to the choices in a 401k.
Ours it through Schwab, though there are various places that do it.
Anyways, that is an option to offset some taxes, if it is something you are interested in. We've only used it a few times for bigger things, and still made direct donations for things like small events and raffle prizes. But tax wise, the more donations we could make from the charitable trust, the better.
Good luck with your potential purchase. As has been said, be careful about the purchase, as the market is turning. Just make sure that it is a good fit for you, and at a good price. It's not like a year ago, where you might go for one that is a little more expensive than you want, and has some compromises or work needed.
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Dave
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Post by Dave on Jul 18, 2022 13:34:10 GMT -8
I can only speak for my experiences from these 12 months, and I know that many things have changed as the used housing market has started to open up, but I would be very cautious of new homes that have been built in the last couple of years. Although I bought a new home this past March, as I found myself with very little choice, and I chose a builder with a good reputation, but if I had had any other option I would have taken it. The problem is that these homes were built as quickly as was possible, with questionable materials by tradesmen that had more work then they could handle. I’ve seen homes built with framing, that only a few months earlier, would have been thrown into the dumpster. But of course it was going to be hidden by the sheet rock. “Who would know and the check has already cleared”. Plumbing and wiring that were not likely inspected. HVAC that needed immediate attention. And so on and so on. And these houses are/were selling as fast as they could build them. And the prices are close to double what they would have been a couple of years ago. The market likes to refer to these homes as “Farm House” and sometimes as “Minimalist”, but I think that sometime in the future they will be tagged as “Pandemic Homes”. Proceed with caution and take nothing for granted. I know, too much information.
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