Hi All,

I have a situation which I can use some advice. I've been working in PA for 6 months now and want to move my family down from NYC permanently. Also we like to purchase a place instead of renting. Now my question is relating to when should I sell stock options. What would be the best scenario to sell the stocks.

1. Sell now while still a resident of NYC then purchase home (state and city rate = ~ 10%).
2. Move down, change address, borrow money, purchase home and sell stock (prorated NY and PA ? )
3. Move down, rent short term, and sell stock and purchase house early next year? (PA & township tax (4.07%)

I guess my main question what is the best way to sell my stocks ( options and ESPP ~ 60k gain) taking into account moving to PA.

Thanks!

If you sell the stocks AFTER exercising the options, you must wait one year and one day to get the more advantageous long-term capital gains rate (maximum tax rate of 15%). Short-term capital gains is taxed at your normal marginal tax rate.

In my opinion, you should NOT sell stock solely to buy the house. If you want to sell the stock for other reasons, then go ahead, but if you feel the stock is a good investment, keep it and try to finance the house some other way.

If you buy the house, you need to close prior to 1 September 2006. If you close after that, it is likely the mortgage interest for the four months in 2006 will NOT exceed your combined standard deduction of about $10,400. This would cause you to effectively waste the mortgage interest paid in those months.

For this reason, it is possible that renting for the first six months may actually make sense tax-wise. Further, it will give you plenty of time to shop for a good house.

Thanks Atlanta Tax Expert!
I have a follow-up question.
Scenario 1.
Buy for 350k with taxes @ 4500 a year.
Or rent identical place for 1800 a year and keep investments.
Assuming you will have to move again within 4-5 years. What would you do?
It hard to decide without keeping your emotions in check in buying a house.

Thanks!

$1,800 a YEAR for rent? If that figure is accurate, then rent, by all means! $350K at 4% yields $14,000 before taxes, plus you save the $4,500.