Bonny
Junior Associate
Joined: Nov 17, 2013 10:54:37 GMT -5
Posts: 7,434
Location: No Place Like Home!
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Post by Bonny on Jan 14, 2015 11:47:22 GMT -5
MWCPA and others,
You may be following the thread on YM About $100k income and pay no taxes.
I keep reading that if your ordinary income is being taxed at 15% or less your cap gain rate will be 0. Is that really true? Or up to certain thresholds?
It's hard for me to believe that I could have a $100k cap gain and pay no cap tax even if my ordinary income is really low.
Thanks!
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taxref
Junior Member
Joined: Dec 31, 2010 11:09:13 GMT -5
Posts: 220
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Post by taxref on Jan 14, 2015 20:00:23 GMT -5
"I keep reading that if your ordinary income is being taxed at 15% or less your cap gain rate will be 0."
That is close, but not exactly right. The actual rule is that if ones taxable income, including the capital gains, would be in the 15% rate the LTCG rate is 0.
So the first thing to do is to add up all taxable income, and apply the rate schedule for ordinary income to that number. If that number would be in the 15% bracket, the LTCG rate is 0. If $1K of that total would be in the 25% bracket for ordinary income, that $1K LTCG would be taxed at 15%. The rest of the LTCGs would be taxed at 0.
The same principle holds true for higher tax brackets.
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Bonny
Junior Associate
Joined: Nov 17, 2013 10:54:37 GMT -5
Posts: 7,434
Location: No Place Like Home!
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Post by Bonny on Jan 14, 2015 20:41:51 GMT -5
Thanks taxref; that makes sense. I'm trying to do some tax projections based on the sale of two different properties. I appreciate the help!
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