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The basics
Selling an asset is not the same as earning the entire sale price. Basis is returned without being taxed again; the gain is the sale proceeds above basis. In a brokerage account, the model assumes a proportional slice of basis leaves with each withdrawal.
Illustrative numbers
A proportional brokerage sale
Account value$100,000
Remaining cost basis$60,000
$25,000 withdrawal gain$10,000
Forty percent of the account is embedded gain, so 40% of the withdrawal—$10,000—enters the long-term capital-gains calculation. The other $15,000 is modeled return of basis.
Calculation transparency
How it works in MoneyWhatIf
- 01
Brokerage dividends are taxed when received and, when reinvested, increase remaining basis.
- 02
Modeled gains use the long-term 0% / 15% / 20% federal ladder stacked above ordinary taxable income, plus applicable NIIT and state treatment.
- 03
A primary-home sale compares gross sale price with modeled basis, applies the federal $250,000 single or $500,000 joint exclusion, and prices the remainder.
Keep in mind
Model limits
The model does not select individual tax lots or distinguish every short-term holding, wash sale, or asset-specific rate.
Capital losses are realised on every sale below basis, as a single long-term pool: it nets against the year's gains and carries forward without expiry, but it is not deducted against ordinary income. Washington's excise reads the same netted gain the federal return does. A carryforward already held from before the plan is entered once in Default settings and inherited by new plans.
Brokerage basis is proportional, which is a planning approximation rather than a tax-lot optimization.
Home basis does not capture every improvement, selling cost, depreciation-recapture, or eligibility detail of the residence exclusion.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
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Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.