I've got a handful of stocks that I'm planning on cashing in for a house down payment. I'm wondering if anyone knows if I will get hit with capital gains tax, if I'm immediately reinvesting the money in a home?

  • 1
    What country are you in? – Mike Scott Jan 23 '12 at 14:27
  • What makes you think you wouldn't get hit with capital gains tax? – JohnFx Jan 23 '12 at 16:06
  • Question needs clarity. Which Country? What kind of holding e.g. Long term or Short Term? – Natwar Lath Jan 24 '12 at 13:12

I'm not sure where people keep getting this idea, but I see it come up a lot.

Anyway, you pay capital gains taxes when you sell an investment that has appreciated. It makes no difference when/if you reinvest the money or what you invest it in.

If you are afraid of the tax burden you can minimize it by:
1) Selling a stock that you have held longer than a year to get the lower long-term rate.
2) Sell a stock that hasn't appreciated that much and therefore doesn't have a lot of gains to tax.

3) Sell a stock that's below purchase price (i.e. at a loss) to offset any short term gains.

  • 4
    John, the old rules had people rolling the gain from home sale to the next house. This no longer applies. For investment property, a 1035 exchange is still available to sell one building and buy another. Nothing to do with stocks. Just confusion. – JTP - Apologise to Monica Jan 23 '12 at 18:01

Assuming that you have capital gains, you can expect to have to pay taxes on them. It might be short term, or long term capital gains. If you specify exactly which shares to sell, it is possible to sell mostly losers, thus reducing or eliminating capital gains.

There are separate rules for 401K and other retirement programs regarding down payments for a house. This leads to many other issues such as the hit your retirement will take.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.