Tax Question: Capital Loss Carryover

[Alan]

Assuming the capital gains are long-term and the dividends are qualified, no federal taxes would be owed in your example. The deductions offset ordinary income first.

What do you mean by ordinary income?

Assuming, in the example above, that the $11k was all long term gains, and that $1k of the dividends were qualified with $1k of non qualified divs and $2k of interest.

Surely there is some federal taxes owed since the total income of $15k is greater than the $12k of deductions, and make this for a single person, not a married couple.

I can see why I have needed a tax program this last 20 years

 

[Moemg]

Very interesting. Sometimes I also feel like I should override my tax software, but it is usually correct. Taxes are hideously complex.

Ha

I absolutely agree .My husband worked for the IRS and every year he brought home a large telephone size manual of the new changes .

 

[FIRE'd@51]

What do you mean by ordinary income?

Assuming, in the example above, that the $11k was all long term gains, and that $1k of the dividends were qualified with $1k of non qualified divs and $2k of interest.

Surely there is some federal taxes owed since the total income of $15k is greater than the $12k of deductions, and make this for a single person, not a married couple.

I can see why I have needed a tax program this last 20 years

Ordinary income is taxed at the same rates as earned income (e.g. wages). In your second example, the 1K of non-qualified dividends and the the 2K of interest would be taxed as ordinary income. Still no Federal tax would be owed, since the deductions (12K) are greater than the ordinary income (3K), and the LT gains and qualified dividends are taxed at zero since they fall into the 10% and 15% brackets.

 

[Free To Canoe]

"When you figure the amount of any capital
loss carryover to the next year, you must take
the current year’s allowable deduction into ac-
count, whether or not you claimed it and whether
or not you filed a return for the current year."

Publication 550 page 67 under Capital Loss Carryover

I believe that you have to take the 3000 loss on the 1040 every year even if you don't need it. I was in this situation last year.
Free to canoe

 

[kaneohe]

Ordinary income is taxed at the same rates as earned income (e.g. wages). In your second example, the 1K of non-qualified dividends and the the 2K of interest would be taxed as ordinary income. Still no Federal tax would be owed, since the deductions (12K) are greater than the ordinary income (3K), and the LT gains and qualified dividends are taxed at zero since they fall into the 10% and 15% brackets.

FIRE'd is correct: another way of looking at it via the 1040...
AGI = 15K; Deduction/exemptions = 12K; Taxable Income = 3K
The formula for calculating tax calculates tax on CG/QDIV separately.
Separating out CG/QDIV = 12K; Taxable Income - QDIV/LTCG = -9K
Tax on -9K = 0; Tax on CG/QDIV= 0 since taxable income = 3K is in
the 10/15% bracket (<25%). Total tax = 0

 

[Alan]

FIRE'd is correct: another way of looking at it via the 1040...
AGI = 15K; Deduction/exemptions = 12K; Taxable Income = 3K
The formula for calculating tax calculates tax on CG/QDIV separately.
Separating out CG/QDIV = 12K; Taxable Income - QDIV/LTCG = -9K
Tax on -9K = 0; Tax on CG/QDIV= 0 since taxable income = 3K is in
the 10/15% bracket (<25%). Total tax = 0

Thank you - both you and FIRE'd