CAPITAL GAINS

[v029060]

IF my wife and I collect roughly $50k annually from social security, how much can we net from the sale of stocks before capital gains tax kicks in if we file married jointly?

[rjs]

The answer to your question depends on whether the capital gains are short-term or long-term, as well as other factors. I suggest that you use TaxCaster to see the effect of different amounts of capital gain. In the "Other income" section you can enter various amounts of Social Security benefits and short-term and long-term capital gains and immediately see the amount of tax you would owe, if any.

[Opus 17]

If half your SS plus your other income is more than $32,000, then part of your SS benefit becomes taxable.  So you will start to have "taxable income" at only $7000 of gains.  But, you have a standard deduction of $29,200, so even though your benefit is partly taxable, you won't owe tax until your total taxable income is more than your standard deduction.

Then, short term capital gains are taxed along with ordinary income, but long term capital gains are tax-free unless your total taxable income rises above $123,000 (including the standard deduction).

So it's a complicated moving target.  You could potentially have a long term capital gain of up to $80,000 and not pay capital gains tax, but you would still pay some tax on the taxable portion of your SS benefit.  The tax caster app is probably the best way to play around with numbers.  

[rjs]

@v029060 

I have to modify or retract my recommendation to use TaxCaster. Another user discovered that TaxCaster currently does not calculate the tax correctly for 2024 if you have qualified dividends or long-term capital gains. So if some of your capital gains are long-term, you should not rely on TaxCaster right now for what you are trying to accomplish. As an alternative you could buy the TurboTax download software for 2024 (not TurboTax Online) and use the What-If Worksheet in forms mode to easily enter various income amounts and see how the tax comes out.