3 ms·

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...

Nope

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...