Thanks for the explanation. But what is still confusing me is the Line Items. When the 1040 and Schedule D shows up at the IRS, do they look at the Line 15 and see that it shows a taxable income of $40,000, but that is taking into considering the long-term stock sale? And according to the supporting document Schedule D the majority of that taxable income on Line 15, though "taxable" per se, is the stock sale. Hence, when that is taken into consideration, the amount of tax owed is lower because the Schedule D sale 'backs out" that income because it fell under the 0% Long term Married/Joint category? The confusion is the "taxable income" line item AFTER the capital gains line item, but there isn't a place that shows the capital gains isn't included in the calculation of the final tax due. Make sense?
