If my taxable income is over the maximum for avoiding capital gains tax (@$52,000) will I have to pay capital gains tax on all of the gain or just on the marginal amount

[TomYoung · Accepted solution]

Once your taxable income - which includes both short term and long term capital gains - breaks through the top of the last tax bracket that taxes long term capital gains at 0%, only the amount of long term capital gain that's put you into the next tax bracket gets taxed at the 15% rate.  So if your taxable income including your LTCG put you $1 into one of the tax brackets where LTCG get taxed at 15%, only $1 of the LTCG would get taxed, no matter what the actual dollar amount of the LTCG.

Tom Young

[Critter]

This is where some tax planning is very important ... to reduce your AGI a deductible IRA contribution could have been an option prior to 4/15   and  selling off some losers to balance the winners could have been done by 12/31.

[Critter]

Review the Qualifying Dividend & Cap Gain Tax worksheet to see how this happens.

[SweetieJean]

and keep in mind that state tax treatment may be different.