My GF wants to cash out all her Apple stock for the downpayment on a house.

But she is on an income-contingent repayment plan for her massive student loans—so she is afraid if she cashes out her $40k of Apple stock, then it will make her adjusted gross income (AGI) go up from $50k to $90k for the year, and then the following year her student loan payments will skyrocket, since it's based on AGI.

Is that fear justified? Or can you write off the downpayment on a house so it doesn't impact AGI? If her loan payments went up to what they would be for someone who makes $90k then we can't also afford to take on a mortgage payment...

  • Will the payment revert back down in two years, or does it only ratchet up? – user662852 Jun 2 '15 at 21:54

I believe that capital gains do affect AGI, but if she sells $40k of stock, then the AGI doesn't go up by $40k, it only goes up by the gains (gross proceeds of the sale minus cost basis). So if she paid $30k for that stock, then the AGI goes up by $10k not $40k.

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  • Does the capital gains tax get taken out too? (She paid $4,450 for the stock, BTW.) – CommaToast Jun 2 '15 at 2:43
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    She would pay capital gains tax on the gains (the same figure that affects the AGI). There are long term and short term capital gains, depending on how long the stock has been held (1 year+ makes it long term, with a lower tax rate). Based on what she paid, it sounds like it would all be long term, but that's something she/her broker would know. – briantist Jun 2 '15 at 2:53
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    This country has failed because your GF borrowed money and has to pay it back? Cash out the stock and pay off the student loans. – AbraCadaver Jun 2 '15 at 14:53
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    To minimize the AGI boost effect she could sell a portion of the stock each year, for 2...4 years. – ScottMcP-MVP Jun 2 '15 at 21:08
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    This country failed because your girlfriend got a ten bagger as a retail investor in the stock market? – user662852 Jun 2 '15 at 21:52

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