Confused about 2018 capital gains tax rules

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Raybo
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Confused about 2018 capital gains tax rules

Post by Raybo » Wed Jun 13, 2018 9:44 am

I just spent about 30 minutes reading posts and articles about the 2018 capital gains rules. Since I am harvesting investments with gains for retirement expenses, I am trying to plan the sales I'll have to make to fund 2019 and their effect on my Federal income taxes, which I try to keep at 0.

From what I have read, it appears that long-term capital gains in 2018 are treated, more or less, as capital gains in 2017. That is, the gains will be taxed based on my income level excluding the gains. Thus, if my income minus dedications is less than $77,000 (approximately), then I will pay no tax on capital gains up to $77,000 (approximately).

I am asking about Federal Tax only.

Is my understanding correct?
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

ExitStageLeft
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Re: Confused about 2018 capital gains tax rules

Post by ExitStageLeft » Wed Jun 13, 2018 9:59 am

That is my understanding for married filing jointly.

That's also what this tax estimator shows: https://www.hrblock.com/tax-calculator/#/en/te/aboutYou

kaneohe
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Re: Confused about 2018 capital gains tax rules

Post by kaneohe » Wed Jun 13, 2018 10:18 am

Raybo wrote:
Wed Jun 13, 2018 9:44 am
...........................................

1)From what I have read, it appears that long-term capital gains in 2018 are treated, more or less, as capital gains in 2017.
2) That is, the gains will be taxed based on my income level excluding the gains.
3)Thus, if my income minus dedications is less than $77,000 (approximately), then I will pay no tax on capital gains up to $77,000 (approximately).

I am asking about Federal Tax only.

Is my understanding correct?
Not sure about your understanding or if your wording is not precise so some comments on the statements above
1) true, more or less
2)your capital gains are taxed based on your income level INCLUDING the gains
3)if your income (INCLUDING capital gains) minus deductions (taxable income) is less than (approximately) 77K, then
your capital gains are not taxed.

DSInvestor
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Re: Confused about 2018 capital gains tax rules

Post by DSInvestor » Wed Jun 13, 2018 10:33 am

kaneohe wrote:
Wed Jun 13, 2018 10:18 am

Not sure about your understanding or if your wording is not precise so some comments on the statements above
1) true, more or less
2)your capital gains are taxed based on your income level INCLUDING the gains
3)if your income (INCLUDING capital gains) minus deductions (taxable income) is less than (approximately) 77K, then
your capital gains are not taxed.
I agree with kaneohe but would argue that the capital gains and Qualified Dividend Income (QDI) are taxed but at a rate of 0% for Fed taxes. However, the higher Adjusted Gross Income with the QDI/LTCG could affect other areas of the tax return such as taxable amount of social security benefits, ACA Premium Tax Credit that may increase the final tax liability. If your tax situation includes Premium Tax Credit be careful about how much capital gain you realize as it could cost many thousands of dollars in premium tax credit.
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Hockey10
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Re: Confused about 2018 capital gains tax rules

Post by Hockey10 » Wed Jun 13, 2018 10:37 am

Said another way, if all of your income is from long term capital gains and you take the $24,000 standard deduction for married filing jointly, your long term gains can be $101,000 and you would pay no federal income tax on taxable income of $77,000. But, I am sure that California state taxes will take a healthy chunk out of your gains.

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Raybo
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Re: Confused about 2018 capital gains tax rules

Post by Raybo » Wed Jun 13, 2018 10:39 am

kaneohe wrote:
Wed Jun 13, 2018 10:18 am
Raybo wrote:
Wed Jun 13, 2018 9:44 am
...........................................

1)From what I have read, it appears that long-term capital gains in 2018 are treated, more or less, as capital gains in 2017.
2) That is, the gains will be taxed based on my income level excluding the gains.
3)Thus, if my income minus dedications is less than $77,000 (approximately), then I will pay no tax on capital gains up to $77,000 (approximately).

I am asking about Federal Tax only.

Is my understanding correct?
Not sure about your understanding or if your wording is not precise so some comments on the statements above
1) true, more or less
2)your capital gains are taxed based on your income level INCLUDING the gains
3)if your income (INCLUDING capital gains) minus deductions (taxable income) is less than (approximately) 77K, then
your capital gains are not taxed.
Thanks. Very helpful.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

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HueyLD
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Re: Confused about 2018 capital gains tax rules

Post by HueyLD » Wed Jun 13, 2018 11:43 am

Raybo,

The exact amount is $77,200, not $77,000. You can find that amount in the actual Bill H.R. 1.

Good luck.

Parthenon
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Re: Confused about 2018 capital gains tax rules

Post by Parthenon » Wed Jun 13, 2018 5:08 pm

HueyLD wrote:
Wed Jun 13, 2018 11:43 am
Raybo,

The exact amount is $77,200, not $77,000. You can find that amount in the actual Bill H.R. 1.

Good luck.
Actually, It's $77,400

Ed
"What am I gonna do if I run out of money?"

jebmke
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Re: Confused about 2018 capital gains tax rules

Post by jebmke » Wed Jun 13, 2018 5:10 pm

^ I am pretty sure it is $77,200 - $200 short of the top of the 12% bracket.
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HueyLD
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Re: Confused about 2018 capital gains tax rules

Post by HueyLD » Wed Jun 13, 2018 5:23 pm

Parthenon wrote:
Wed Jun 13, 2018 5:08 pm
HueyLD wrote:
Wed Jun 13, 2018 11:43 am
Raybo,

The exact amount is $77,200, not $77,000. You can find that amount in the actual Bill H.R. 1.

Good luck.
Actually, It's $77,400

Ed
Ed,

$77,200 is listed in the actual law passed. $77,400 is the top amount for the 12% regular tax bracket for MFJ.

retiredjg
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Re: Confused about 2018 capital gains tax rules

Post by retiredjg » Wed Jun 13, 2018 5:23 pm

My understanding is the magic number is $77,200 for married filing jointly.

This is different from the top of the 12% bracket for MFJ which is $77,400.

Yes, those numbers should be the same but it's a glitch that resulted from the new tax law. The difference may or may not be corrected by an administrative adjustment before tax time.

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FiveK
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Re: Confused about 2018 capital gains tax rules

Post by FiveK » Wed Jun 13, 2018 7:11 pm

Raybo wrote:
Wed Jun 13, 2018 9:44 am
I am asking about Federal Tax only.

Is my understanding correct?
You can generate a picture of tax rates on LTCGs for your situation. E.g., see the second picture in this post in Long-term gains and Tax Bracket - Bogleheads.org. That persons's situation differs from yours, but the tool referenced there should work for you.

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