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Should I sell company stock to pay down personal debt?

I'm thinking about selling stock I have purchased in the company I work for to help pay down some of my debt. I need some advice on where I can put the money short term to avoid capital gains tax, then remove and pay off debt. Is this possible?

Feb 08, 2012 by Alena from Salt Lake City, UT in  |  Flag
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23 votes

I want to add a couple of thoughts to supplement what Jody, Victor and Eddie have already contributed. In 2012, the tax rate for long term capital gains is 0% for taxpayers in the 10% and 15% Federal tax brackets. Depending on your tax bracket, you may be able to sell your company stock and owe no Federal capital gains tax.

In fact, you should generally look at how a capital gain might affect the rest of your taxable income. For example, the capital gain could raise your adjusted gross income (AGI) and that may cause more of your Social Security benefits (if you are collecting Social Security) to be taxed or it could potentially cause you to be subject to deduction phaseouts.

I recommend you check with a tax advisor to see how a capital gain will affect you given your specific facts and circumstances.

Comment   |  Flag   |  Jun 07, 2012 from San Diego, CA

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15 votes

Interesting scenario Alena. If you are talking about selling the stock and trying to move it somewhere else to avoid capital gains, that is not possible. You will owe taxes on capital gains once the stock sale is made. Now after you pay off the debt you might be able to take the payments you were making towards the debt and add it to retirement accounts and offset some of the capital gain taxes. As Victor mentions, if you have held this stock for a year then you should have preferable long term capital gain treatment.which should not be higher than 15% of you sell the stock in 2012. There is a significant chance that capital gains rates will be higher in 2013.

Comment   |  Flag   |  Jun 01, 2012 from Abilene, TX

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Alena, paying off high interest consumer debt is always a great idea! The only way to avoid short term gains, though, is to hold the stock for a year. If you have shares older than that, sell those first. Otherwise, my advice is that unless you are in a very high tax bracket, I wouldn't let the tax tail wave the dog; you'll probably be better off paying the tax and getting rid of the debt.

Comment   |  Flag   |  Feb 08, 2012 from Arvada, CO

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Hi Alena,

I'd be curious to know what type of debt it is. Not all debt is created equal.

Eddie Patel

Comment   |  Flag   |  Feb 08, 2012 from Orland Park, IL

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