[TiểuHồLy]

"Shall we "skinder" a bit? Let's say a single rental property's net sale is around $800k, with particular distributions to the invisible hefty interests, costs of previously repaired, and real estate capital gain taxes. She finally would accumulate an estimated $350k/each for more than a decade of investment. Worth it, eh?"

You really can't say anything much here. Vietnamese are complicate .....lol.... Did she claim country/city as rental home? If she did, the utilities cost more home insurance cost less than primary. Then all repair cost need to deduce from tax return each year. Whatever the capital gain is is not relate to the repair cost. Rental will be taxed on any capital gain. You can't run away from tax if selling as a rental property.

Everyone is qualified for the 1031 Exchange as long as you get the new rental in 180 days.

When you withdraw 401k, it will deduce 20% right away. For example, you take out 100K, they will send you the check 80k. Then whatever the total income in that year base on your tax bracket, you may get back or pay more. 401k is pre-tax.

I usually use this info to adjust below 22%, it's not easy, you have to manage well, this would make you like living paycheck by paycheck. In my case, the rental property helped to over come the cash flow.

35% for incomes over $243,725 ($487,450 for married couples filing jointly)

32% for incomes over $191,950 ($383,900 for married couples filing jointly)

24% for incomes over $100,525 ($201,050 for married couples filing jointly)

22% for incomes over $47,150 ($94,300 for married couples filing jointly)
12% for incomes over $11,600 ($23,200 for married couples filing jointly)

As long as you contribute as pre-tax, it's 20% tax ahead. Only Roth is after tax, so no tax for gain.

529 plan is after-tax, no tax on gain.

Let say you earn 100k, contribute 401K 30K and 529k 30K. Then they only deduce 30K from 401k which you still end up 70K. So tax will be 24% for single and 22% for couples.

Pay attention to pre-tax and after-tax plans
-pre-tax is tax on any withdraw but can get tax deduction
-after-tax is money that already taxed, can't get tax deduction, no tax on capital gain. 

For me, pre-tax (401k) for 20 years and after-tax (Roth) for 4 years. Why Roth for 4 years? Because I am in the 24% bracket and no longer able to get away for low tax. So when I am ready to withdraw, I will start the pre-tax first, then keep the Roth continue to grow since it's no tax on capital gain. Then maybe I would take out all Roth when I reach over 70-80.

Happy new year!!!



ps: when you fill income by yourself, read any question even it doesn't apply to you. You gain more knowledge.

You might be right. The Vietnamese folks are calculating and shrewd scheming, especially when involved in taxes. 

Our conversations are slowly crawling to a parallel line now.  
No, brother. She doesn't want to use the 1031 Provision to exchange for another rental property but plans to move in and treat it as her principal residence. After a few years, she would sell it to swap the recognition of gain and shield $500k in capital gain. I am unsure if she qualifies, as I heard tales of social media saying Congress tightened that loophole in 2004. Further, she owes the amount of deducted depreciation recapture taxes if she sold the property after turning it into a primary residence.

The 20% deduction is a lot to pay for withdrawing 401(k). Does that percentage affect all ages? Even if you've reached your retirement age?

It's good to hear that your rental property helped overcome the cash flow. Thanks for pointing out the tax brackets and pre/after-tax plans.

Yes, brother! I always respect and take heed of your crucial advice.