topic Does the standard deduction apply to your calculated annual income for short term capital gains on stocks? in Get your taxes done using TurboTax

Does the standard deduction apply to your calculated annual income for short term capital gains on stocks?

dynamite369 — Fri, 16 Oct 2020 21:56:33 GMT

Suppose my annual income is at $56,000 for 2020 and I am filing as a single tax filer, which would entitle me to a $12,400 standard deduction. Can that $12,400 be subtracted from my $56,000 income to bring down my owed taxes in short term capital gains (as my annual income would only be $43,600) or does the standard deduction not apply when calculating capital gains?

Example: If I traded a stock with an initial value of $100 and sold it for a value of $1,000. I have a short-term capital gain of $900. Would my capital gains tax be $248 (as illustrated below) if the standard deduction didn't apply or $158 if the standard deduction applies.

Tax Type	Marginal Tax Rate	Effective Tax Rate	Tax Amount
Federal	22.00%	22.00%	$198 or $108
NJ State	5.53%	5.53%	$50 or $50
Local	0.00%	0.00%	$0
Total Capital Gains Taxes		$248 or $158

Please let me know if I my calculations are accurate for this example. Thank You!

Re: Does the standard deduction apply to your calculated annual income for short term capital gains on stocks?

macuser_22 — Sun, 25 Oct 2020 23:16:26 GMT

Capital gains are added to your AGI to determine your total income. Then your standard deduction is subtracted form the AGI, what is left is your taxable income. The actual tax on capital gains is calculated on the "Qualified Dividends and Capital Gains Worksheet".

Re: Does the standard deduction apply to your calculated annual income for short term capital gains on stocks?

fanfare — Mon, 26 Oct 2020 01:27:01 GMT

If you are not forms-challenged, review the "Qualified Dividends and Capital Gains Worksheet". to see how it works.

Otherwise, don't even try to think about it.

Turbotax does the calculation - that's what you're paying for.