Capital Gains Tax

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boater07
Posts: 608
Joined: Sun Apr 15, 2007 7:44 pm
Location: Northwest

Capital Gains Tax

Post by boater07 »

Long term CG is taxed at 20% max. However, looking at the 1040, item 6 asks for total gain.
That appears to be included in taxable income which will have higher rate. Where does the
20% limit enter the computation?
minesweep
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Joined: Fri Mar 02, 2007 9:17 pm
Location: PA

Re: Capital Gains Tax

Post by minesweep »

It's calculated on the "Qualified Dividends and Capital Gain Tax Worksheet". The long-term capital gains tax rates are 0 percent, 15 percent and 20 percent, depending on your income.
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neverpanic
Posts: 369
Joined: Sun May 10, 2020 12:26 am

Re: Capital Gains Tax

Post by neverpanic »

boater07 wrote: Wed Sep 16, 2020 11:42 am Long term CG is taxed at 20% max. However, looking at the 1040, item 6 asks for total gain.
That appears to be included in taxable income which will have higher rate. Where does the
20% limit enter the computation?
Your LTCG are taxable, yes, but not as ordinary income. Check lines 3, 6, and 9(?). For your LTCG, you're talking about your qualified dividends, but then your other gains - that are not qualified - will be reported on a 1099 and are taxed as ordinary income.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
fyre4ce
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Joined: Sun Aug 06, 2017 11:29 am

Re: Capital Gains Tax

Post by fyre4ce »

Long-term gains and qualified dividends are fully included in your Adjusted Gross Income (and the various flavors of Modified Adjusted Gross Income), which can have substantial tax consequences. The discounted rate is applied further down the return, when the tax due is actually calculated (on the Qualified Dividends and Capital Gains Tax Worksheet, or the Schedule D Tax Worksheet).

FYI, it's more accurate to say that long-term capital gains are taxed at 23.8%, which includes Net Investment Income Tax that will definitely apply to a taxpayer in the 20% LTCG bracket.
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