topic Will I pay both income tax AND gains tax on a 2019 distribution? in Retirement tax questions

Will I pay both income tax AND gains tax on a 2019 distribution?

msanfilipo — Sat, 13 Jul 2019 22:10:26 GMT

Re: Will I pay both income tax AND gains tax on a 2019 distribution?

SweetieJean — Sat, 13 Jul 2019 22:14:13 GMT

If you mean a qualified retirement plan distribution, you pay only regular income tax. There may also be a penalty if you are less than age 59.5.

Re: Will I pay both income tax AND gains tax on a 2019 distribution?

msanfilipo — Sun, 14 Jul 2019 00:12:40 GMT

Hi SweetieJean - Thanks for your answer.

No, actually, this is not a qualified retirement plan distribution. This is a brokerage account I am surrendering and will need to pay tax on the gains. It is a long term account. I was given the impression by the 1st accounting consult I asked that I would need to pay both the gains tax - which I think would be in the 15% bucket AND income tax as it is income added to my regular income. Somehow I think that answer is wrong or I misunderstood. It looks like this:

Surrender the investment (stock exchange)

Use both the gains and regular income to find the gains tax bracket (=15%)

Then also owe income tax on regular income + gains income which would put me in the 24% bracket. ??

That looks like double taxation, doesn't it?

Is it correct?

Thanks - Mary

Re: Will I pay both income tax AND gains tax on a 2019 distribution?

SweetieJean — Sun, 14 Jul 2019 13:59:51 GMT

For Federal, you would owe only capital gains tax on the distribution. However, the gain is added to your other income to determine which (ordinary income) tax bracket that other income falls into. Also note that some states do not have a special capital gains rates, but tax everything at ordinary income rates.