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Property Sale

 

Tom S
(@tctasarasinmsn-com)
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Joined: 3 months ago
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I have 2 properties entered on the Property tab and am trying to understand the impact of selling at different points in time.

When I put a Sale Year in I see a large credit in Expenses. Looking for clarification on how that money is used from that point forward and can I do anything in the modeling to control how that money is treated.

Thanks


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Stuart Matthews
(@smatthews51)
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Joined: 7 months ago
Posts: 125
 

Tom,

The Property tab is fundamentally an "expenses" page but "income" can be derived from the sale of property, so when "income" exceeds "expenses" on this page PRC treats this as negative expenses (a credit in expenses as you've noted). This value is carried forward onto the hidden page where PRC integrates all of your income, expenses and accounts, and is then factored into the cash flow for the associated year. The case in question will likely result in a positive cash flow in the year of the sale which will then lead to a deposit into your cash account and then likely into your regular investment account (if the deposit would take the cash account above the specified ceiling). Beyond the settings of the cash account floor and ceiling values there are no other controls available for you to affect how this is modeled.


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Tom S
(@tctasarasinmsn-com)
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Thanks Stuart - makes sense now.

One follow up, I noticed on the year of the sale it made my SS benefit fully taxable whereas the next year just a small amount is taxed. I don't know the tax situation in this case just wanted to see if you could confirm that it would makes sense for that to happen.

Thanks


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Stuart Matthews
(@smatthews51)
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Posts: 125
 

Tom,

No, it doesn't make sense for that to happen. I just ran a quick test of this myself and it didn't increase the income being considered for taxation of SS benefits. I'd be happy to take a look at your export file if you care to share it and then I can easily explain what's going on. One other thought, is that a large influx of cash to your regular investment account could possibly result in a significant increase in your AGI, depending upon the settings on the Financial Assets > Taxation page. That's probably worth a look.


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Tom S
(@tctasarasinmsn-com)
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Hi Stuart

Looks like the property sale has nothing to do with it. I pushed the property sale out 5 years and have same results.

Basically SS is being taxed at 85% which I understand, but from age 70 to 71 that tax % drops

from 85 to about 9. From there it does a slow climb over many years. My income from 70 to 71 increases

by a small %. Is it a tax rule based on age > 70?

Thanks


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Stuart Matthews
(@smatthews51)
MemberAdmin
Joined: 7 months ago
Posts: 125
 

Tom,

There's a worksheet in IRS Publication 915 that is used to determine exactly how much of your SS benefits are taxable. The PRC design is based on this worksheet. One thing that might be driving your taxable % up temporarily is Roth conversions.


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Bill Hines, Retirement Planner
(@hines202)
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@tctasarasinmsn-com "Basically SS is being taxed at 85%" More accurately, 85% of your social security is being taxed, it's not at the 85% tax rate, as this might infer to others.

As Stuart said, it could also be due to Roth conversions, which drive income. It could also be due to RMDs after age 72, or taxable gains in the non-retirement accounts that are filled up as you bring in more than you're spending and when your savings hits the 'ceiling' setting (forcing the money into a personal brokerage).

Bill Hines
Financial Counselor/Retirement Planner
Money Coach Group, Inc
https://moneycoachgroup.com
bill@moneycoachgroup.com


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Tom S
(@tctasarasinmsn-com)
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Joined: 3 months ago
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Topic starter  

My Roth Conversions completed prior to this year. My AGI is about the same between the year where the higher SS amount is taxed and the following year where a much smaller portion of the SS is considered taxable. Having said that I have been playing with the numbers and the amount of SS that is taxable in that one year has shrunk to less than 50%, unfortunately I don't know what I update I did to trigger the change. Not a big deal as the amount is small enough that it's not worth chasing down. Thanks for the help.


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Bill Hines, Retirement Planner
(@hines202)
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@tctasarasinmsn-com Are you in one of the states that tax SS benefits? Some do, but phase it out at different ages. That could have something to do with it. Or maybe the AGI change was just enough to bring you into the 50% bracket.

Bill Hines
Financial Counselor/Retirement Planner
Money Coach Group, Inc
https://moneycoachgroup.com
bill@moneycoachgroup.com


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