everyone! Just as the post describes, I'm caught between 2 decisions. Right now I have 10.6k invested in stocks, which I bought last August, that are worth 19.5k. I planned to use these profits to help with a down payment for my first home, but that was before I recently learned I would be taxed 15% for short term investments. My specific question is, should I sell my stocks, take a 15% hit on the profits, buy a house, and hope the deductions from a ~200k home outweigh the 15% tax? Or should I wait 'til September, let the stock grow some more, and save the 15%?

  • 1
    What makes you think that the stocks will grow more by September? They might fall drastically. – Victor Mar 25 '17 at 6:06
  • How do you know you will be taxed at 15%? – xiaomy Mar 25 '17 at 13:28
  • How much other cash do you have to put down? Can you afford the payment on a 15 year fixed rate loan? – D Stanley Mar 25 '17 at 14:20
  • You will be taxed at your marginal tax rate for short-term gains, and 15% for long-term gains if you wait until you've held the stocks for a year. – D Stanley Mar 25 '17 at 14:21
  • Interest deductions can only ever reduce your expenses, nothing more. – user Mar 27 '17 at 9:09

In the United States Short-term capital gains are taxed at rates similar to regular income which is 25% if you make less than $91,000 and 28% if you make more than that but less than $190,000. If you make more than $190,000 then the rate is 33%. If you hold the stock for a year or more than the tax rate is 15%, unless your income is less than $33,000 in which case there is no tax on long-term gains.

As a general rule, the way to make money is to stay out of debt, so I cannot advise you to assume a mortgage. Financially you are better off investing your money. Much like you I bought a house with a mortgage using about $30,000 in a down payment about 20 years ago and I paid it off a few years ago. If I had to do it over again, I would have bought a shack (a steel building) for $30,000 and lived in that and invested my income. If I had done that, I would be about $500,000 richer today than I am now.

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