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ttlc22019
Level 2

For paying long-term capital gains tax, is Required Minimum Distribution counted as income?

I got the following table from the Internet.  Case in study: John is single and chooses to not get RMD in 2020 so his 2020 income will be under $40,000.  Does it mean that he can sell any large amount of long-term stocks and make big capital gains  without paying tax?  That seems to look like a one-in-a-lifetime opportunity for him as only this year 2020 he can choose to not get RMD.   A separate case: John chooses to get RMD and assume RMD is counted into income so his income is now $50,000.  What taxes will he pay for making $120,000 capital gains? 

 

Long-term capital gains tax rates for the 2020 tax year

FILING STATUS                    0% RATE             15% RATE                    20% RATE

SingleUp to $40,000$40,001 – $441,450Over $441,450
Married filing jointlyUp to $80,000$80,001 – $496,600Over $496,600
Married filing separatelyUp to $40,000$40,001 – $248,300Over $248,300
Head of householdUp to $53,600$53,601 – $469,050Over $469,050

Source: IRS 

1 Best answer

Accepted Solutions
macuser_22
Level 15

For paying long-term capital gains tax, is Required Minimum Distribution counted as income?

Yes, RMD's add to your AGI (total income) but it does not work that way.   The capital gains is also income.

 

To be 0% your total income including the stock sales must be under $40K.

 

For example, if your ONLY income was $120,000 capital gains (no other income of any type) then your tax would be about $10,264 for single - the first $39,375 is taxed at 0% the remaining $68,425 at 15% (after the standard deduction is applied).

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

1 Reply
macuser_22
Level 15

For paying long-term capital gains tax, is Required Minimum Distribution counted as income?

Yes, RMD's add to your AGI (total income) but it does not work that way.   The capital gains is also income.

 

To be 0% your total income including the stock sales must be under $40K.

 

For example, if your ONLY income was $120,000 capital gains (no other income of any type) then your tax would be about $10,264 for single - the first $39,375 is taxed at 0% the remaining $68,425 at 15% (after the standard deduction is applied).

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

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