- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Investors & landlords
The tax bracket for calculating the tax on a long-term capital gain depends on your total taxable income, including the capital gain. The long-term capital gain is "stacked" on top of your taxable ordinary income. The gain is not necessarily all taxed at the same rate. Only the portion of the gain that fits into the 15% bracket is taxed at 0%.
For example, suppose your filing status is single and your taxable ordinary income is $30,000. The top of the 15% bracket for single filing status is $37,650 (for 2016), so all of your ordinary income falls in the 10% and 15% brackets. You have $7,650 in the 15% bracket that is not used up by your ordinary income. Therefore the first $7,650 of your long-term capital gain would be taxed at 0%. But any additional capital gain above $7,650 falls into the 25% bracket, so it is taxed at 15%. So if you manage to keep your taxable ordinary income just a bit below the top of the 15% bracket, only a small portion of your capital gain will get the 0% tax rate.
Making the situation somewhat better for you, though, note that your tax bracket is based on your taxable income, not gross income. Your taxable income is your gross income minus adjustments (if any), exemptions, and either the standard deduction or itemized deductions.