$75,000 capital gain and dividend income exclusion

[Tom in Carolina]

Greetings,

I thought I read somewhere that this $75,000 is excluded from income tax.

Am I dreaming or is this true ?

Married, filing jointly, receiving SE income, and Social Security benefits

TIA,

Tom

[HelenC12]

No, I'm not aware of that rule. Are you referring to your federal income tax or state income tax? If state, what state?

Per IRS: The tax rate on most net capital gain is no higher than 15% for most individuals. Some or all net capital gain may be taxed at 0% if your taxable income is less than or equal to $41,675 for single and married filing separately, $83,350 for married filing jointly. 

You may have some dividends that you don't end up paying federal income tax on. Some people refer to these as tax-free dividends. This can happen if your dividends are qualified and your taxable income falls below a certain threshold or if they are tax-free dividends paid on municipal bonds.

Ordinary dividends are taxed using the ordinary income tax brackets for tax year 2022.

Qualified dividend taxes are usually calculated using the capital gains tax rates. For 2022, qualified dividends may be taxed at 0% if your taxable income falls below:

• $41,676 for those filing single or married filing separately,
• $55,801 for head of household filers, or
• $83,351 for married filing jointly or qualifying widow(er) filing status.

The qualified dividend tax rate increases to 15% for taxable income above

• $41,676 through $258,600 for married filing separately filers,
• $41,676 through $459,750 for single filers,
• $55,801 through $488,500 for head of household filers, or
• $83,351 through $517,200 for married filing jointly or qualifying widow(er) filers.

Qualified dividend income above the upper limits of the 15% bracket requires paying a 20% tax rate on any remaining qualified dividend income. Depending on your specific tax situation, qualified dividends may also be subject to the 3.8% Net Investment Income Tax.

[Tom in Carolina]

--> Federal Taxes

This is probably what I was referring to:

For 2022, qualified dividends may be taxed at 0% if your taxable income falls below:

• $83,351 for married filing jointly or qualifying widow(er) filing status.

Thanks HelenC12 !

Tom

[Tom in Carolina]

me again ... 

It appears that both Qualified Dividends and Long Term Capital gains up to $83,351

are taxed at 0% as below. Correct ?

For 2022, qualified dividends may be taxed at 0% if your taxable income falls below:

• $83,351 for married filing jointly or qualifying widow(er) filing status.

Thanks,

Tom

[Vanessa A]

"It appears that both Qualified Dividends and Long Term Capital gains up to $83,351

are taxed at 0% as below. Correct ?" If your taxable income is less than $83,351 and you are married filing a joint return, then yes, most long term capital gains and qualified dividends are taxed at 0%.  However, some things like collectibles do not get this special tax treatment.

Also, if your total taxable income is greater than $83,351 for MFJ, then you would be taxed at either 15% or 20%.  It is not about the amount of your capital gains, it is based on your taxable income. 

[speakerfritz]

this answer is not clear...tax tax is considered to be 15%, the capital gains tax or the income tax on the gain amount...we should always clearly detail both in answers to tax consequences of home sales.    

[Vanessa A]

Depending on your overall income, your capital gains income tax rate will be either 0%, 15% or 20%. The capital gains rates for 2024 are as follows:

• Zero percent rate for the following income
  • $47.025 for single or MFS
  • $63,000 for HOH
  • $94,050 for Married Filing Jointly
• Fifteen percent for income more than above but less than below
  • $291,850 for MFS
  • $518,900 for Single
  • $551,350 for Head of Household
  • $583,750 for Married Filing Jointly

The gain on the sale of your home would be Capital Gains tax.

The rest of your income, other than the capital gains income, will be taxed at your ordinary tax rate.