TL;DR
Selling stock funds to finance a home purchase triggers a hefty capital gains tax; using a securities-backed loan instead can save a fortune.
In spring 2021, the author decided to move to a bigger house. To make the down payment, he sold some of his index funds. Three months after moving in, he sold his old house and used the proceeds to buy back the funds.
This back-and-forth left his portfolio total roughly unchanged, but it generated more than $500,000 in long-term capital gains. When he filed his taxes in spring 2022, he owed nearly $200,000 in capital gains tax on that.
A different move, a much smaller bill
What if he had not sold the funds but instead borrowed the down payment through a margin loan or a securities-backed line of credit (SBLOC)?
Interest rates were low then, so borrowing would have cost only about 2% a year. Three months of interest would have come to around $10,000.
What ignorance really costs
The author estimates that his lack of knowledge left him paying $200,000 more in taxes. If that money had stayed invested, it might have grown to over $500,000 by now.
That is the price he paid for his blind spot.
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