I have $227,000 in long term capital gains in a taxable account mutual fund. Since I have no earned income, my internet searches all seem to come up with a short answer of a 0% tax rate (Federal). I was thinking of "re-setting" this capital gain at ZERO this year, as I do anticipate earned income in future years.
Is there any amount cap on the ZERO Federal rate for long term Capital Gains.
Head of Household
1 Dependant
@Cannonfm4n wrote:Potentially, I could spread the gain over more years at the 0% rate if I understood the calculation methodology.
For Head of Household, the 0% long-term capital gains tax bracket is $0 to $52,750 (taxable income) in 2019.
If you only have long-term capital gain to report, then you will be in the 15% tax bracket on any gain that exceeds $52,750 of taxable income.
Your post is somewhat difficult to decipher since you wrote "re-setting this capital gain at zero".
Obviously, you cannot "reset" capital gains; you can either recognize them through sales transactions and report them on your income tax return or offset them with capital losses.
Regardless, you might want to use TaxCaster (link below) to get a rough idea of your tax liability on $227,000 in capital gains.
https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
Thanks for the response!
Sorry. I used confusing terminology.
What I should have said is that I am contemplating realizing all $227,000 in long term Capital Gains in calendar year 2020 when I have no earned income in anticipation that the net tax rate on the long term gain would be ZERO.
I ran this through the Tax Caster as suggested and added the following relevant information:
Head of Household
1 dependent under 13
$19,000 Mortgage interest
$4,500 Property tax
$2,000 Charitable
The result was:
2018 Estimated Federal Amount Owed
(After Tax Reform)
@Cannonfm4n wrote:Potentially, I could spread the gain over more years at the 0% rate if I understood the calculation methodology.
For Head of Household, the 0% long-term capital gains tax bracket is $0 to $52,750 (taxable income) in 2019.
If you only have long-term capital gain to report, then you will be in the 15% tax bracket on any gain that exceeds $52,750 of taxable income.
There is no cap. If you have no other income, you could potentially make a $5 million profit on selling an investment home and pay 0% LTCG rate (ie not a single dollar to the Fed). But you will still have normal tax rates most likely to the state. Turbotax just 99% of the time doesn't utilize the capital gain tax worksheet and instead includes this as ordinary income. I know because its doing it to me this year. I've been working on this for weeks and cant seem to get around it.
@aninja750 Are you using the Online version or the Desktop program?
Even though it shows up as income on the first page,if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D. The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet. It does not get filed with your return.
In the online version you need to save your return as a pdf file and include all worksheets to see it.
For the Desktop version you can switch to Forms Mode and open the worksheet to see it. Click Forms in the upper right (upper left for Mac) and look through the list and open the Qualified Dividends and Capital Gain Tax Worksheet. And you will need to use this IRS worksheet on page 15.
https://www.irs.gov/pub/irs-pdf/i1040tt.pdf
If you are using the CD/Download software, go to forms mode and open the Form 1040 or Form 1040-SR Worksheet. Between lines 15 and 16 there is a Tax Smart Worksheet with 7 checkboxes. The box that is checked shows you which of the 7 possible methods was used to calculate your tax. Then you can look for the appropriate worksheet for that method. But if the Tax Table or Tax Computation Worksheet was used, there is no worksheet. Those are simple standardized methods that do not require a worksheet.
@aninja750 wrote:If you have no other income, you could potentially make a $5 million profit on selling an investment home and pay 0% LTCG rate
That is incorrect. The rate is based on TOTAL income (including the capital gain), not only the 'other' income.