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A property sells at the start of the month you choose, at its projected value on that date. CoastMath subtracts your selling costs, pays off any loan linked to the property, deposits the remainder into the account you pick, and taxes the gain in the same year. For a primary residence that passes the ownership and use test, the gain is taxed only above the $250,000 or $500,000 home-sale exclusion. A property can also be sold automatically when your accounts can no longer cover spending.
The sale takes place at the start of the sale month. Everything tied to the property runs until then and stops at the sale:
- Appreciation compounds for the months owned. A June sale grows the value for five months of the sale year.
- Carrying costs (property tax, maintenance and insurance) are charged for the months owned.
- Payments on a linked loan are made for the months before the sale.
In later years the property is gone, and so are its costs.
Deposited proceeds=Sale price−Selling costs−Remaining balance of loans linked to the property
The sale price is the property’s full projected value. Selling costs (% of sale price) covers commissions and other costs of selling; it reduces both the cash you receive and the taxable gain. Loans with this property as their Linked real asset are paid off first, and the rest goes to the target account. If the price is less than a linked loan’s balance, the whole price goes to that loan. The unpaid balance stays as debt, and the loan’s regular payments pay it off starting the next year. Loans that aren’t linked to the property are unaffected by the sale.
Apart from selling costs, the sale itself doesn’t change net worth: the property’s value becomes cash, and the loan disappears. Net worth falls by the selling costs and the tax on the gain.
Gain=Sale price−Selling costs−Adjusted tax basis
For a primary residence, the exclusion is subtracted and the result can’t go below zero. For a rental, depreciation taken during the plan also reduces the basis.
- Married filing jointly in the sale year
- $500,000
- Any other filing status
- $250,000
| Value when the plan starts | $900,000 | |
|---|---|---|
| → | Sale price, three and a half years later at 3% a year$900,000 × 1.03 compounded over 3.5 years | $998,097 |
| − | Adjusted tax basisPurchase price plus capital improvements | $350,000 |
| = | Gain | $648,097 |
| − | Home-sale exclusion | $500,000 |
| = | Taxable long-term capital gain | $148,097 |
| Linked mortgage balance at the sale$250,000 at 5.5% over 25 years; payments made through June | $232,011 | |
| = | Deposited to the target account$998,097 − $232,011 | $766,086 |
A single filer selling the same home would have a taxable gain of $398,097.
Ownership and use test
The exclusion applies only if you owned the home and lived in it as your main home for at least two of the five years before the sale. Enter Owned since (year) and month and, if you moved in later, Main home since (year) and month; CoastMath assumes you kept owning and living in it until the sale. A home bought with a planned purchase uses its purchase date. If the test isn’t met, the whole gain is taxed and the projection says so. With no dates, CoastMath assumes the test is met and shows a warning.
Rental property
A rental doesn’t get the exclusion, except for the personal share of a main home that is partly rented (see Homes and other real assets). The part of its gain equal to the depreciation taken, before and during the plan, is taxed at your ordinary rate but no more than 25%. The rest is a long-term capital gain. A loss on a rental is deductible against ordinary income, and any rental losses carried forward on that property are deducted in the sale year (see Homes and other real assets).
| Sale price | $400,000 | |
|---|---|---|
| − | Selling costs at 6% | $24,000 |
| − | Adjusted tax basis after depreciation$300,000 − $41,250 of depreciation | $258,750 |
| = | Gain | $117,250 |
| → | Taxed at no more than 25% (depreciation taken) | $41,250 |
| → | Taxed as a long-term capital gain | $76,000 |
The taxable gain is taxed as a long-term capital gain. It is added to that year’s adjusted gross income and taxed with the rest of that year’s income. For rates and the effect on other income, see Capital gains, dividends and investment taxes. For properties that aren’t a primary residence, see Homes and other real assets: personal-use gains are taxed, and personal-use losses aren’t deductible.
With Auto-liquidate on depletion turned on, a property is sold in any year where the accounts in your withdrawal order can’t cover a shortfall. If more than one property qualifies, CoastMath sells properties that aren’t your primary residence first, then the primary residence, in the order they’re listed. It sells one whole property at a time and stops once the shortfall is covered.
An automatic sale uses the property’s value after that year’s full appreciation. The year’s carrying costs and loan payments have already been charged by then. Linked loans are paid off and the gain is taxed as in a planned sale. The remaining proceeds go to the target account, which covers the shortfall first and keeps whatever is left. If a sale covers the shortfall, that year doesn’t count as a failure.
For how shortfalls reach this point, see How shortfalls are funded.
CoastMath has no single move event. You build a move from a sale, a milestone and expenses. Start with a date milestone for the move, set to the month of the sale (see Milestones and event timing).
Sell and rent
- Set the home’s sale year and month to the move date.
- Add rent as an expense with the move milestone as its Start Milestone.
- If you entered costs of the old home as separate expenses (for example, HOA dues or utilities), set their End Milestone to the move. Don’t end the property’s own carrying costs or the linked mortgage: both stop automatically at the sale.
Sell and buy
- Set the old home’s sale as above.
- Add the new home as a property with Planned purchase on, in the same month. Enter its price, closing costs and loan (see Homes and other real assets), and its carrying costs.
- Mark the new home as Primary residence too, so its own later sale can use the exclusion. The old home keeps its flag for its sale.
Keep the old home and rent it out
A property is either a primary residence or a rental for the whole plan, so converting a home to a rental isn’t modeled. To approximate it, leave the sale year blank and add the rent as an income stream starting at the move milestone. If you move to another state, also see Move between states or cities.