No, the amount on Line 15 represents all of your taxable income. But all income is not taxed the same. Your ordinary income that is included on Line 15 uses the tax table. But capital gains and qualified dividends taxes are calculated separately - this income is not taxed as ordinary income (which uses the tax tables). If you look at the Tax-Smart Worksheet (part of Form 1040 Wks), you will see a breakdown of how the tax on Line 16 was calculated. Line A1 from the Tax-Smart Worksheet is the amount of tax from the ordinary income tax tables. Line 4 shows your tax on dividends and capital gains. There is also a worksheet included in your return that shows the details of this calculation. Regarding your capital gains:
The tax rate you pay in 2020 depends on whether your gain is short-term or long-term.
- Short-term profits are taxed at your maximum tax rate, just like your salary, up to 37% and could even be subject to the additional 3.8% Medicare surtax, depending on your income level.
- Long-term gains are treated much better. Long-term gains are taxed at 15% or 20% except for taxpayers in the 10% or 15% bracket. For low-bracket taxpayers, the long-term capital gains rate is 0%. There are exceptions, of course, since this is tax law.
- Long-term gains on collectibles—such as stamps, antiques, and coins—are taxed at 28%, unless you're in the 10% or 15 % or 25% bracket, in which case the 10% or 15% rate or 25% rate applies
- Gains on real estate that are attributable to depreciation—since depreciation deductions reduce your cost basis, they also increase your profit dollar for dollar—are taxed at 25%, unless you're in the 10% or 15% bracket.
- Long-term gains from stock sales by children under age 19—under age 24 if they are students—may not qualify for the 0% rate because of the Kiddie Tax rules. (When these rules apply, the child’s gains may be taxed at the parents’ higher rates.)
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