Are taxes on L-T capital gains determined by working up through the brackets (15% - 20%) or at one rate determined by the Taxable Income threshold?

Forum|Forum|2 years ago
March 29, 2024
1 reply
0 views

For example, if your Taxable Income is just over a threshold, do you pay the higher rate just on gains over that threshold amount?

TurboTax Online

Best answer by DanaB27

No, you do not pay the same rate for all of your capital gains. You can see the calculation on the Qualified Dividends and Capital Gain Tax Worksheet:

On line 9 is the amount taxed at 0%, on line 17 the amount that is taxes at 15%, and on line 20 is the amount that is taxed at 20%.

CatinaT1

Here is how capital gains are taxed.

Net capital gains are taxed at different rates depending on overall taxable income, although some or all net capital gain may be taxed at 0%. For taxable years beginning in 2023, the tax rate on most net capital gain is no higher than 15% for most individuals.

A capital gains rate of 0% applies if your taxable income is less than or equal to:

$44,625 for single and married filing separately;
$89,250 for married filing jointly and qualifying surviving spouse; and
$59,750 for head of household.

A capital gains rate of 15% applies if your taxable income is:

more than $44,625 but less than or equal to $492,300 for single;
more than $44,625 but less than or equal to $276,900 for married filing separately;
more than $89,250 but less than or equal to $553,850 for married filing jointly and qualifying surviving spouse; and
more than $59,750 but less than or equal to $523,050 for head of household.

You can find additional information here: Topic no. 409, Capital gains and losses

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

dberlienAuthor

Thank you, however, the response did not answer my question.

If your Taxable Income exceeds a threshold, do you pay at that rate for all of your net capital gains or are lower rates applied to amounts under the threshold(s)? This is important in figuring out Estimated Tax Payments.

DanaB27Answer

No, you do not pay the same rate for all of your capital gains. You can see the calculation on the Qualified Dividends and Capital Gain Tax Worksheet:

On line 9 is the amount taxed at 0%, on line 17 the amount that is taxes at 15%, and on line 20 is the amount that is taxed at 20%.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"