Help with 0% capital gain tax for 2008...

[FIREd]

Hi,

This year my MIL will be in the 15% tax bracket in 2008 (single, 15% tax bracket for 2008: $8,026 < taxable income < $32,550). Her taxable income for 2008 will be around $26,000. She will be receiving a large, long term capital gain of around $100K in November. It is my understanding that some of those gains would qualify for the 0% capital gain tax for 2008. I have read about it and it is as clear as mud to me.

My understanding is that:
she will be paying 0% on $32,550 - $26,000=$6,550 of capital gains and 15% on the rest, i.e. $100,000 - $6,550 = $93,450.

Is that correct?

 

[OAG]

You may want to go to TAXACT.COM and download the early release 2008 tax program (it is free) and plug in numbers. Should answer it for you and give you a head start on preparing her 2008 tax return.

 

[ziggy29]

Wow. Capital gain. Who'da thunk it? What is this thing called a *gain* of which you speak?

And yes, I'm pretty sure your calculation is accurate. Just remember that if she's collecting Social Security, some of it (maybe 50%) might be taxable income at that income level.

And with a gain that large, make sure that she won't get smacked by the AMT.

 

[FIREd]

You may want to go to TAXACT.COM and download the early release 2008 tax program (it is free) and plug in numbers. Should answer it for you and give you a head start on preparing her 2008 tax return.

Thanks for the tip. I'll give it a try.

Wow. Capital gain. Who'da thunk it? What is this thing called a *gain* of which you speak?

And yes, I'm pretty sure your calculation is accurate. Just remember that if she's collecting Social Security, some of it (maybe 50%) might be taxable income at that income level.

And with a gain that large, make sure that she won't get smacked by the AMT.

Yeah, capital gains, would you believe it! Unfortunately most of it is going to debt repayment...

She is not currently collecting SS and according to the HR Block calculator, she should not get smacked by the AMT.

 

[retire@40]

You may want to go to TAXACT.COM and download the early release 2008 tax program (it is free) and plug in numbers. Should answer it for you and give you a head start on preparing her 2008 tax return.

Just make sure you plug the numbers in the right place.

And make sure the program isn't fraught with bugs this early that could severely distort the results.

In a situation like this with large amounts to consider, I would tend to go with an Excel spreadsheet to figure this out in conjunction with the help of a CPA.

 

[OAG]

Just make sure you plug the numbers in the right place.

And make sure the program isn't fraught with bugs this early that could severely distort the results.

In a situation like this with large amounts to consider, I would tend to go with an Excel spreadsheet to figure this out in conjunction with the help of a CPA.

I used it the other day (when it was released). It was correct, and I did not find any bugs - I know it was correct since as you mention I do use Excel to track this and the next several years and the numbers for 2008 matched. I only use this program to print out the return and file electronically (BTW FREE). I would caution that one area to look at close is AMT since the program may or may not have the 2008 Fix built in - in that case it may show AMT taxes due when they may not be. BTW other than AMT I do not think there are any changes for 2008 that we already did not know about and since Congress is not in session there should be no further changes for 2008.

 

[FIREd]

Just make sure you plug the numbers in the right place.

And make sure the program isn't fraught with bugs this early that could severely distort the results.

In a situation like this with large amounts to consider, I would tend to go with an Excel spreadsheet to figure this out in conjunction with the help of a CPA.

I have experience doing my own taxes but her situation is way too convoluted this year for me to get involved with her tax return. So she will probably use a CPA to do her 2008 taxes. But she is counting on me to help her figure how much to pay for her quarterly taxes in January. I just want to make sure she doesn't get hit with underpayment penalties (though I don't want to be sending too much money to uncle Sam either).

 

[kaneohe]

Does she get SS? Is it included in the 26K of taxable income? If she does and if it isn't,
I would guess that 85% of it would be taxable and if it is any reasonable $$ amt of SS, that would fill up the 15% tax bracket so that all of the CG would be at 15%.

The few times that I've used the HRBlock calculator, I thought it was fine so that should help w/ your answer. I think they have a 2008 version out already.

 

[clifp]

If you MIL would like to adopt me I have plenty of capital losses than can be used to offset her gains. Hey it works for banks and other corporations why not people?

 

[retire@40]

If you MIL would like to adopt me I have plenty of capital losses than can be used to offset her gains. Hey it works for banks and other corporations why not people?

The adopting strategy won't work. You will have to marry her. I'm sure she'll want a big fat kiss.