Ilyce Urges Couple to Reserve $35,000 Tax Hit From $175,000 Property Profit

1 articles · Updated · Slate · Aug 17

$175,000 from the investment-property sale may not all be available: Ilyce says the couple should first calculate taxes, which could consume about $35,000 and leave roughly $140,000.
Two tax layers drive that estimate — depreciation recapture can be taxed up to 25%, while the remaining gain faces long-term capital-gains rates, with a 3.8% net investment income tax possible above income thresholds.
Credit card balances should be paid first, followed by the $40,000 in federal student loans at 6%, because holding cash earning about 4% while paying 6% interest is, she says, a losing trade.
The remaining $20,000 of student debt under 4% could then be repaid over less than two years using the freed-up $900 monthly payment, while still preserving a sizable cash cushion for security or a possible move abroad.