Help Me Understand Capital Gains on Stock Sale Over $583K

Hello!

I’ve been using the same accountant for a few years now to file my taxes, and with some big life events coming up (like a home refinance), we’re planning to sell some stock from our brokerage account to apply the proceeds towards our mortgage principal.

I’m trying to figure out how much of the sale would go to taxes and other expenses. We live in NYC, and I’m assuming a long-term capital gains tax rate of 15% plus around 10% for city and state taxes, so I’d lose about 25% of the sale to taxes. For example, if I sell $100k worth of stock, I’d pay $25k in taxes and put $75k towards the mortgage.

Here’s where I’m a bit confused—my accountant mentioned that this stock sale wouldn’t count as income, so as long as our W-2 income plus the stock sale is below $583K (we’re married), the 25% tax is all I’d need to pay. Is that correct? I was under the impression that it could trigger higher taxes, especially if it pushes our total income up.

I just want to make sure I’m planning correctly. Does anyone have experience with this? Are there any calculators or formulas that you’d recommend for figuring this out? Thanks in advance.

Hey there! I’ve been through something similar, so I get where you’re coming from. When I sold some stock to pay off a mortgage, I learned that the capital gains tax is indeed separate from your ordinary income tax. You’re correct that long-term capital gains are taxed at a lower rate, but it’s crucial to consider the combined effect of your total income and the capital gains. While the 15% federal rate plus state and city taxes might be the baseline, if your total income including the gains pushes you into a higher tax bracket, you could end up paying more. Your accountant is right that it won’t count as ordinary income, but be sure to confirm how it affects your overall tax bracket. Tools like TaxAct or TurboTax can help simulate scenarios and estimate taxes based on your situation. It’s always a good idea to double-check with your accountant to ensure there aren’t any surprises!