0% LT Capital Gain Tax Question

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florencenightingale
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0% LT Capital Gain Tax Question

Post by florencenightingale » Mon May 13, 2019 10:03 am

Hi,
Love how helpful everyone is on this forum!

I am optimizing my retirement investments, and moving older investments to the superior Vanguard funds.

I obtained the cost basis on the funds I currently own, and I would be making a $7000 USD gain overall.

I am expecting to make about $30,000 in 2019, as a single filer. Is my understanding correct that for 2019, I will be paying 0% in capital gains up to $39,375, which is the case here?

Am I missing something before I proceed with liquidating these funds?

Thank you!

Penguin
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Re: 0% LT Capital Gain Tax Question

Post by Penguin » Mon May 13, 2019 10:16 am

Is my understanding correct that for 2019, I will be paying 0% in capital gains up to $39,375, which is the case here?
That is $39,375 of taxable income. That is after deductions. The standard deduction is $12,200.
Jon

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mhadden1
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Re: 0% LT Capital Gain Tax Question

Post by mhadden1 » Mon May 13, 2019 10:18 am

Your taxes could/should work out like this, MFS:

30000 w-2 income
- 12200 std deduction
= 17800 taxable income,

leaving 21675 of space up to the top of the 12% bracket at 39475. So, in this situation, up to 21675 of capital gains/qualified dividends would be taxed at the 0% rate.

Remember that the income taxed at 0% is still income and would probably affect income limits, like for Earned Income Tax Credit or whatnot.
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Wiggums
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Re: 0% LT Capital Gain Tax Question

Post by Wiggums » Mon May 13, 2019 10:20 am

+1. I agree

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samsoes
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Re: 0% LT Capital Gain Tax Question

Post by samsoes » Mon May 13, 2019 10:21 am

If you are under 65 and on an ACA exchange plan, the additional income will still "count" as MAGI -- even though it's taxed at 0% -- and will reduce your premium subsidy, even possibly push you over the ACA cliff.

Be careful!
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Topic Author
florencenightingale
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Re: 0% LT Capital Gain Tax Question

Post by florencenightingale » Mon May 13, 2019 10:40 am

Thanks so much for the advice and tips for making sure I'm calculating things correctly! :)

cas
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Re: 0% LT Capital Gain Tax Question

Post by cas » Mon May 13, 2019 11:15 am

You may well have already thought about this and be asking about just the federal taxes, but ... just to be safe, let me throw in this:

If your state has a state income tax, don't forget about state taxes on the capital gains. (Most states I've seen treat capital gains the same as ordinary income (e.g from W-2), but I wouldn't be at all surprised if there are outliers that treat them differently.)

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FiveK
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Re: 0% LT Capital Gain Tax Question

Post by FiveK » Mon May 13, 2019 11:26 am

At worst it will make only a $15 difference, but the 15% LTCG rate starts $100 below the top of the 12% bracket for ordinary income in 2019.

One can enter other "fixed" income and see the marginal rates for any amounts of "optional" income using the personal finance toolbox Excel spreadsheet.

Bug
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Re: 0% LT Capital Gain Tax Question

Post by Bug » Mon May 13, 2019 12:59 pm

I agree with cas. I had some capital gains last year and owed no federal taxes, but had Illinois state tax to pay and I believe it was counted as ordinary income . As always, check with your tax advisor

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FiveK
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Re: 0% LT Capital Gain Tax Question

Post by FiveK » Mon May 13, 2019 1:17 pm

Bug wrote:
Mon May 13, 2019 12:59 pm
As always, check with your tax advisor
Or learn enough to avoid the need to pay someone for relatively simple answers. ;)

See https://dilbert.com/strip/2014-12-15 for a humorous take, with a very large seed of truth.

Bug
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Re: 0% LT Capital Gain Tax Question

Post by Bug » Tue May 14, 2019 5:17 am

I don’t try to do my own tax returns

Topic Author
florencenightingale
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Re: 0% LT Capital Gain Tax Question

Post by florencenightingale » Wed May 15, 2019 8:00 am

FiveK wrote:
Mon May 13, 2019 1:17 pm
Bug wrote:
Mon May 13, 2019 12:59 pm
As always, check with your tax advisor
Or learn enough to avoid the need to pay someone for relatively simple answers. ;)

See https://dilbert.com/strip/2014-12-15 for a humorous take, with a very large seed of truth.
Haha! So true! Hence my move from active investing to passive... :wink:

Thanks again, everyone!

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AAA
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Re: 0% LT Capital Gain Tax Question

Post by AAA » Wed May 15, 2019 10:23 am

florencenightingale wrote:
Mon May 13, 2019 10:03 am
I am optimizing my retirement investments, and moving older investments to the superior Vanguard funds.
By "retirement investments" are you referring to 401K or IRA money?

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