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PGH
Level 4

Should one not have income during the year you have realized large capital gains

Can some one please tell me which tax bracket will be my income (Roth conversion) of $36,000 if I went ahead and take long term capital gain if $120k in the same year (not counting standard deduction) ,I am looking at the tables at the end of this article and wanted clarification  :

 

1) is it still 12 % for single filer or

2) the $35 k income is going to be in the 24% bracket while my LTCG is still at 15%

 

thanks for your replies .

4 Replies
Level 20

Should one not have income during the year you have realized large capital gains

Work the worksheet on page 40 to see how it works ... however the cap gains is capped at 15% :

  https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

 

 

Highlighted
Level 18

Should one not have income during the year you have realized large capital gains

its a lot more complicated because there are stages at which LTCG gets taxed a 0% and tax rates are incremental some income gets taxed at lower rates additional income gets taxed at higher rates. .   an estimate would be that $15,000 of LTCG would be taxed at 0%,  the other $105,000 at 15%.    your taxable distribution is reduced by the standard deduction so you are taxed on only $24,000. about $9500 gets taxed at 10% with the balance taxed at 12% (it's like capital gains are ignored when computing taxes on ordinary income)    

PGH
Level 4

Should one not have income during the year you have realized large capital gains

I kind of know LTG is @ 15 but I am trying to find out if my conversion , say $ 35k is at 12 % or at the higher bracket . It helps me know whether to do a conversion or not if I take a LTG if $100k the same year or just do the Roth conversion a different year . Thanks again 

Level 20

Should one not have income during the year you have realized large capital gains

The cap gains is taxed at a max of 15% or 20% however is can be less if the ordinary tax is less ... use the worksheet link provided in my original answer to calculate the possible taxes. Use different amounts of conversions to see where your "sweet spot" is.

If you are using the downloaded version you can use the "What IF" tool or make "test" returns.