4 ms·

Does the US have any sort of capital gains allowance? In the UK you can make £12000 (about $16000) of capital gains every year tax free so this covers most smal

Does the US have any sort of capital gains allowance? In the UK you can make £12000 (about $16000) of capital gains every year tax free so this covers most smaller investors, etc.

jotakami 7y ago
Nope
- dannyw 7y ago
  That's not exactly true in practice. If your income + capital gains is less than $40,000 this year, your long term capital gains rate is 0%. Go 1% over, and you pay 15% on the whole thing. It's really silly (and also not progressive; as the vast majority of America falls under the $40k to $440k bracket).
  - IanDrake 7y ago
    Be careful giving tax advice here, because you're partly wrong and missing key details. For instance, I'm married and I can make $120k (with no other income) of long term capital gains and pay $2.5k in federal taxes on it. The cap gains bracket is progressive. Source:https://turbotax.intuit.com/tax-tools/calculators/taxcaster/ https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
  - kd5bjo 7y ago
    This isn’t correct. The calculation can be found as the worksheet on page 33 of https://www.irs.gov/pub/irs-pdf/i1040gi.pdf https://www.irs.gov/pub/irs-pdf/i1040gi.pdf — regular income gets taxed first, and then long-term gains after. The 15% bracket only applies to the portion in excessof $40k, not the whole amount (lines 11-20 on the worksheet).
  - crazygringo 7y ago
    This is false, and is an (unfortunately) common misunderstanding about tax brackets generally. You pay 0% up to $40K, and the 15% starts applying only to income greater than $40K. You absolutely do not pay 15% on the whole thing. You can verify on the IRS worksheet itself line 11 "This amount is taxed at 0%": https://apps.irs.gov/app/vita/content/globalmedia/capital_gain_tax_worksheet_1040i.pdf https://apps.irs.gov/app/vita/content/globalmedia/capital_ga... Here's a blog entry describing: "Notably, because the 0% long-term capital gains rate only applies until crossing the threshold of... taxable income..., the reality is that the opportunity for 0% capital gains is inherently limited – as with other low tax brackets, it only applies until there’s enough income to cross out of that bracket, and any additional income falls in the next higher bracket." https://www.kitces.com/blog/understanding-the-mechanics-of-the-0-long-term-capital-gains-tax-rate-how-to-harvest-capital-gains-for-a-free-step-up-in-basis/ https://www.kitces.com/blog/understanding-the-mechanics-of-t...
yrro 7y ago
Note that this "annual exempt amount" is on top of an individual's personal allowance (defaults to £12500). If you had no other income in a tax year, you'd only pay Capital Gains Tax on gains over £24500.
dannyw 7y ago
The long term capital gains rate is 0% if your income is $0 to $39,375; so essentially your first $40k of capital gains is exempt if you have no income. For the purposes of this calculation, your cap gain is added to your income to work out your bracket.
- anon73044 7y ago
  I would expect that 50% or more of hackernews readers make over $39,375
  - abstractbarista 7y ago
    Certainly, but what OP actually meant is that capital gains from $0-$39375 is taxed at 0% (if you're a single filer). Then your next $395175 is taxed at 15%. Anything over that is taxed at 20%. It's similar to our tax brackets. Going to a higher bracket doesn't suddenly mean that all the money fitting in the prior bracket is taxed at that higher rate.
topmonk 7y ago
The problem isn't the total cost, it's the reporting requirements. Who wants to look up and record the fair market value of bitcoin and then calculate gains every time they use it to buy a coffee?

Does the US have any sort of capital gains allowance? In the UK you can make £12000 (about $16000) of capital gains every year tax free so this covers most smaller investors, etc.

jotakami 7y ago

Nope

dannyw 7y ago
That's not exactly true in practice. If your income + capital gains is less than $40,000 this year, your long term capital gains rate is 0%. Go 1% over, and you pay 15% on the whole thing. It's really silly (and also not progressive; as the vast majority of America falls under the $40k to $440k bracket).
- IanDrake 7y ago
  Be careful giving tax advice here, because you're partly wrong and missing key details. For instance, I'm married and I can make $120k (with no other income) of long term capital gains and pay $2.5k in federal taxes on it. The cap gains bracket is progressive. Source:https://turbotax.intuit.com/tax-tools/calculators/taxcaster/ https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
- kd5bjo 7y ago
  This isn’t correct. The calculation can be found as the worksheet on page 33 of https://www.irs.gov/pub/irs-pdf/i1040gi.pdf https://www.irs.gov/pub/irs-pdf/i1040gi.pdf — regular income gets taxed first, and then long-term gains after. The 15% bracket only applies to the portion in excessof $40k, not the whole amount (lines 11-20 on the worksheet).
- crazygringo 7y ago
  This is false, and is an (unfortunately) common misunderstanding about tax brackets generally. You pay 0% up to $40K, and the 15% starts applying only to income greater than $40K. You absolutely do not pay 15% on the whole thing. You can verify on the IRS worksheet itself line 11 "This amount is taxed at 0%": https://apps.irs.gov/app/vita/content/globalmedia/capital_gain_tax_worksheet_1040i.pdf https://apps.irs.gov/app/vita/content/globalmedia/capital_ga... Here's a blog entry describing: "Notably, because the 0% long-term capital gains rate only applies until crossing the threshold of... taxable income..., the reality is that the opportunity for 0% capital gains is inherently limited – as with other low tax brackets, it only applies until there’s enough income to cross out of that bracket, and any additional income falls in the next higher bracket." https://www.kitces.com/blog/understanding-the-mechanics-of-the-0-long-term-capital-gains-tax-rate-how-to-harvest-capital-gains-for-a-free-step-up-in-basis/ https://www.kitces.com/blog/understanding-the-mechanics-of-t...

yrro 7y ago

Note that this "annual exempt amount" is on top of an individual's personal allowance (defaults to £12500). If you had no other income in a tax year, you'd only pay Capital Gains Tax on gains over £24500.

dannyw 7y ago

The long term capital gains rate is 0% if your income is $0 to $39,375; so essentially your first $40k of capital gains is exempt if you have no income. For the purposes of this calculation, your cap gain is added to your income to work out your bracket.

anon73044 7y ago
I would expect that 50% or more of hackernews readers make over $39,375
- abstractbarista 7y ago
  Certainly, but what OP actually meant is that capital gains from $0-$39375 is taxed at 0% (if you're a single filer). Then your next $395175 is taxed at 15%. Anything over that is taxed at 20%. It's similar to our tax brackets. Going to a higher bracket doesn't suddenly mean that all the money fitting in the prior bracket is taxed at that higher rate.

topmonk 7y ago

The problem isn't the total cost, it's the reporting requirements. Who wants to look up and record the fair market value of bitcoin and then calculate gains every time they use it to buy a coffee?