How are Capital Gains on a stock sale taxed?

[davismac]

What is the name of your state?AZ

How are my capital gains taxed? If my taxable income is $100,000, and I make a capital gain of $10,000 on a long term asset, does that make my income $110,000? I've read that tax on a long term stock sale is 15% for MFJ, with an income over $77,200. But if my income , from the example I've given, is $110K, wouldn't the $10,000 be taxed at my marginal rate of 22%?

 

[Taxing Matters]

What is the name of your state?AZ

How are my capital gains taxed? If my taxable income is $100,000, and I make a capital gain of $10,000 on a long term asset, does that make my income $110,000? I've read that tax on a long term stock sale is 15% for MFJ, with an income over $77,200. But if my income , from the example I've given, is $110K, wouldn't the $10,000 be taxed at my marginal rate of 22%?

Long term capital gains on most assets, including stock, are taxed at lower rates than ordinary income (e.g. wages, self-employment income, rents, royalties, etc). Those rates are affected, though, by the total of all your income. In 2018 the rates are:

0% for couples with income up to $77,200.
15% for couples with income from $77,201 to 479,000.
20% for couples with income of 479,001 or more.

High income taxpayers may also have to pay a separate 3.8% tax on net investment income.

Short term capital gains are taxed at the same rates as your ordinary income.

So, in your example of a long term capital gain of 10,000 and total income of $110,000 the rate of tax on a joint income tax return will be 15%.

 

[FlyingRon]

You're also lucky in that in recent years, the state of Arizona has also lowered the rate on long-term capital gains.

 

[xylene]

If you have 10 grand of gains and a 6 figure earned income, you should consult a tax professional. Especially if you have no idea how it works and have not filed and paid gains tax before. It is not crazy complex, but it is much more involved than a basic return.

Good luck and nice job on the profits.

 

[FlyingRon]

It's pretty straightforward and things like TurboTax make it a non-event (I typically have thirty or so stock transactions to report each year)

 

[davismac]

Thanks for the replies. Helped clear it up.