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Lonestar
Level 2

Refund not changing when adding stock sale

I may be premature in asking this, as I have not dug very deep... although in starting this thread I think I am realizing why my refund is not changing... maybe.

I am taking a 2020 return for my mom and editing it, creating a scenario showing a stock sale with a gross sale amount, initially around $10K, and indicating that she did not pay any federal taxes on the sale. Yet, for some reason, after entering the sale and completing that section, it doesn't affect my refund at all! I would have thought that it would subtract the taxes due on the stock sale at whatever rate it determines based on current income, etc. 

 

BUT... now I'm realizing that it's possible she may pay no taxes if her income as a single filer is less than $40,000. Does that sound like it could be the reason there is no change in the refund amount?  Although, withdrawals from annuities + SS does exceed $40K a year, but I'm not sure what is counted as 'income' for the purpose of capital gains taxes.

Is that enough for someone to make sense out of this? LOL

5 Replies
GeorgeDenseff
Level 6

Refund not changing when adding stock sale

The first $40,000 in capital gains is taxed at 0% rate for single tax payers in 2020.

Lonestar
Level 2

Refund not changing when adding stock sale

Ahhhh, OK so the 'ordinary' or other income up the that point is basically irrelevant and the $40K income figure I'm reading about, above which the tax rate goes to 10%, is just related only to the capital gains income? (I hope I worded that correctly.)

Lonestar
Level 2

Refund not changing when adding stock sale

Because I just found this on Bankrate.com, which seems to contradict what you indicated, George...

"For example, in 2020, individual filers won’t pay any capital gains tax if their total taxable income is $40,000 or below. However, they’ll pay 15 percent on capital gains if their income is $40,001 to $441,450. Above that income level, the rate jumps to 20 percent." 

This indicates TOTAL taxable income, not just capital gains income. Am I missing something? 

Thanks for your patience.

GeorgeDenseff
Level 6

Refund not changing when adding stock sale

You are correct.  I read that too quickly and my brain stopped at 10K.  If her other income exceeded 40K, then there should be a 15% capital gains on the 10K.

Lonestar
Level 2

Refund not changing when adding stock sale

Yup. OK... So, after further investigation, seeing that her Taxable income from Line 15 is less than $40K due to the standard deducible and , I can now see that there is room for $x amount of capital gains before exceeding the $40K of TAXABLE INCOME and incurring the 15%... which of course is only 15% on the amount exceeding $40K (say $2K) I do believe, and not triggering taxes on the whole $42,000.

 

Thanks George. I really didn't dig deep enough before asking the question but your responses helped me figure out what to look for and why it is what it is.

 

That should do it for this topic.

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