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Capital Gains and Income Tax Bracket

cp44444 — Fri, 11 Dec 2020 03:40:11 GMT

Does the figure used to calculate the rate at which capital gains are taxed include the capital gains themselves? In other words, if an individual makes $75k in professional income and $100k in capital gains, would that person’s capital gains be taxed as if the person’s income was $75k or full MAGI $175k?

Re: Capital Gains and Income Tax Bracket

fanfare — Fri, 11 Dec 2020 05:35:19 GMT

Use the Qualified Dividends and
Capital Gain Tax Worksheet or the Schedule D
Tax Worksheet (whichever applies) to figure
your tax if you have qualified dividends or net
capital gain. You have net capital gain if Schedule
D (Form 1040), lines 15 and 16, are both
gains.

See IRS booklet 1040 and 1040-SR Instructions

Re: Capital Gains and Income Tax Bracket

NCperson — Fri, 11 Dec 2020 12:50:36 GMT

no, it doesn't include the capital gains itself.

If you are filing Married-Joint, there is no capital gains tax on the 1st $5,000 and then 15% on the remaining $95,000 of capital gains.

if you are filing Single, the capital gains is 15% on the whole $100,000.

nerdwallet has a good calculator:

https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates

Re: Capital Gains and Income Tax Bracket

Anonymous — Fri, 11 Dec 2020 20:27:31 GMT

the way it works is that taxes are calculated on your ordinary income (including short-term capital gains) as if there were no Qualifying Dividends or Long-term Capital gains. then the tax on those capital gains and dividends are computed, but the ordinary income (after subtracting itemized or standard deduction above the cutoff for the filings status of the return will push the tax on those from the 15% bracket to the 20% bracket

and with that much income the taxpayer would also have to pay the additional 3.8 & tax on net investment income