tax rate for long-term capital gain


K

Kevin

Can you please help to explain what is the tax rate for long-term
capital gain? Are the tax rate in "Table Capital Gains Taxation in
the United States from 2003 forward" on this page updated?

http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

On Schedule D Tax Worksheet, I had ~$83k on line 1, ~$11k on line
9-12, but I got zero on line 24. Finally, the $11k long-term gain was
taxed at 25% as regular income due to line 36.

Do I miss anything please?

thanks, -Kevin
 
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B

Bill Brown

Can you please help to explain what is the tax rate for long-term
capital gain?  Are the tax rate in "Table Capital Gains Taxation in
the United States from 2003 forward" on this page updated?

http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

On Schedule D Tax Worksheet, I had ~$83k on line 1, ~$11k on line
9-12, but I got zero on line 24. Finally, the $11k long-term gain was
taxed at 25% as regular income due to line 36.

Do I miss anything please?
Do not rely on Wikipedia for anything important such as how much you
owe for income taxes.

Most long term capital gains are taxed at a maximum rate of 20%. Long
term capital gains classified as unrecaptured Section 1250 gains are
taxed at a maximum rate of 25%. Long term capital gains on items
classified as collectables are taxed at a maximum rate of 28%.

I assume you mean the worksheet on page D-14 of the 2011 instructions
for Schedule D. If you are getting a result that suggests your long
term capital gains are being taxed at more than the above, then you
are almost certainly making an error when completing the worksheet
unless you have unrecaptured Section 1250 gains or gains on
collectibles.
 
I

ira smilovitz

Do not rely on Wikipedia for anything important such as how much you
owe for income taxes.

Most long term capital gains are taxed at a maximum rate of 20%. Long
term capital gains classified as unrecaptured Section 1250 gains are
taxed at a maximum rate of 25%. Long term capital gains on items
classified as collectables are taxed at a maximum rate of 28%.

I assume you mean the worksheet on page D-14 of the 2011 instructions
for Schedule D. If you are getting a result that suggests your long
term capital gains are being taxed at more than the above, then you
are almost certainly making an error when completing the worksheet
unless you have unrecaptured Section 1250 gains or gains on
collectibles.
And don't rely on this post either. Long term capital gains are taxed at a maximum rate of 15%, not 20%.

Ira Smilovitz
 
R

Rich Carreiro

ira smilovitz said:
And don't rely on this post either. Long term capital gains are
taxed at a maximum rate of 15%, not 20%.
Well, a maximum NOMINAL rate of 15%, anyways :)

The experienced marginal rate can be significantly higher.

For example, you have someone who itemizes, has medical deductions in
excess of 7.5% of their AGI, and who collects social security and has
some SS benefits subject to tax.

Say such a person has an additional $100 of LTCG. That will increase
their non-SS AGI by $100. Which will increase the amount of SS
subject to tax by $50-$85 (let's use $50 for now). So AGI will
increase by $150. That increase will reduce the allowable medical
deduction by 7.5% of $150 or $11.

So the $100 additional LTCG will increase taxable income by $161.
$100 of that is the LTCG and will be taxed at 15%, or $15. The other
$61 is taxed as ordinary income and will be taxed at, say, 25% (to be
subject to the 15% rate on LTCG you have to be in at least the 25%
bracket). 25% of $61 is $15.

Thus that extra $100 of LTCG ends up increasing your tax by $30. So
even though the "advertised" tax rate on your LTCG is 15%, you
actually experience a 30% marginal rate on your LTCG.
 
B

Bill Brown

And don't rely on this post either. Long term capital gains are taxed at a maximum rate of 15%, not 20%.

Ira Smilovitz
Good catch, Ira. Thanks.
 
J

JoeTaxpayer

Well, a maximum NOMINAL rate of 15%, anyways :)
(snipped the Rube Goldbergesque process of adding $100 cap gain)
Thus that extra $100 of LTCG ends up increasing your tax by $30. So
even though the "advertised" tax rate on your LTCG is 15%, you
actually experience a 30% marginal rate on your LTCG.
Wow - amazing, Rich. I've watched how a $100 IRA conversion can be taxed
at 47% for someone in the 25% bracket due to the Social Security effect,
but missed the effect of the 7.5% medical.

The "Phantom Rate" can be a killer if ignored. It's easy to look at the
rate charts and see the standard marginal rates. I've always loved to
tinker on the tax software to see the delta by adding $100 or removing
$100 to income/cap gains/etc to understand the true impact.
 
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D

dvsarwate

Wow - amazing, Rich. I've watched how a $100 IRA conversion can be taxed
at 47% for someone in the 25% bracket due to the Social Security effect,
but missed the effect of the 7.5% medical.
Another effect that might be included is what would happen
if the $100 increase in AGI (and hence MAGI) would trigger
a change in the Medicare Part B IRMAA premium adjustment.
While this is not an _income tax_, the monthly rates per person
are $0, $46.10, $115.30, $184.50, and $253.70 depending on
the level of income (for Single, HoH, QW and MFJ filers, only
top two brackets for MFS). If the increase in premiums does
not cause an increased deduction on Schedule A, that extra
$100 of income can have significant effect on a couple's
finances.

Dilip Sarwate
 

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