For round numbers as an illustration… let’s assume our joint income is $50k. Assume we sell all of our stock for $100k in long term capital GAINS. Our income is taxed normally, then NC would tax us at a flat 5.75% rate on those gains. However, wouldn’t the federal income tax on the entirety of the gains (all $100k) be taxed at 0% due to our low income and the LT CG tax rates for 2023?
This is how it works for federal taxes.
With married filing jointly, and $50K of income, you get a standard deduction of $27,700, so your taxable income is $22,300. The top of the 12% ordinary income tax bracket is $89,450.
That means that the first $67,150 of long term gains is taxed at 0% (because $89,450 minus $22,300 equals $67,150). Any capital gains on top of that will be taxed at 15%, since your total taxable income is above $89,450 and therefore in the "regular" 22% bracket, so your LTCG rate is 15% on that part of your gain. But the capital gains does not push your regular income into the 22% bracket.
