I'm well below any limits that would result in my capital gains being taxed at more than 15%, but am anticipating taking some large capital gains this year. When I increase the proceeds of my LT capital gains by 100,000 exactly to test the likely impact on the upcoming year's taxes (i.e. I increase the proceeds by 100,000 and leave the basis unchanged), my total tax increases by about $18,000. Total income, including capital gains, is less than 300,000 so my understanding is that my capital gains tax should increase by exactly 15,000. Worse yet, when I make the hypothetical capital gain exactly 1 million, then the effective capital gains seem to be taxed at 23%. (I realize at this level of capital gains the tax rate will increase to 20%, but nothing higher than that.) What am I misunderstanding here? There is no AMT and I just take the standard $24,000 deduction. I cannot find a single article on the internet that explains why the effective capital gains tax rate exceeds 15%.
One article was very explicit that capital gains tax are taxed AFTER ordinary income so the capital gains tax should not be pushing my ordinary income into a higher bracket. So for the 100,000 hypothetical capital gain, this should be a simple 15% of $100,000.
