question on long term capital gains

[DEC-1982]

I have a question about long term capital gain taxes.
Consider this scenario for year 2016.
Sell a taxable mutual fund in 2016, with ST gains of 1K and LT gains of 19K.
Withdraw 30K of IRA in 2016. IRA is tax-deferred IRA, and withdrawals are taxable.

All numbers were rounded to thousands.

Wages 40K
ST gain 1K
LT gain 19K
IRA withdrawal 30K

Total Income 90K

Personal exemption 8K
Standard deduction 12K

Taxable income 70K
If tax on LT is 0, then taxable income is 51K.


Can I take it that my 19K has 0 tax on it? So the 0% and 15% tax rates apply to the appropriate portions of 51K?

 

[pb4uski]

No, taxable income is 70k and comprised of 19k of tax preferenced income taxed at 0% and 51k of ordinary income taxed at ordinary rates.

See Taxcaster. If you put in your example without the LTCG and with the LTCG the $6,641 tax doesn't change so the LTCG at taxed a 0%.

 

[kaneohe]

Can I take it that my 19K has 0 tax on it? So the 0% and 15% tax rates apply to the appropriate portions of 51K?

you also have a 10% rate in there 2015 Tax Rate Schedules - Fairmark.com Fairmark.com

 

[DEC-1982]

No, taxable income is 70k and comprised of 19k of tax preferenced income taxed at 0% and 51k of ordinary income taxed at ordinary rates.

See Taxcaster. If you put in your example without the LTCG and with the LTCG the $6,641 tax doesn't change so the LTCG at taxed a 0%.

Thanks for clarifying pb4uski. And for reminding me of Taxcaster.

I tried to do this with my 2015 TurboTax, but it wanted TurboTax Premier so I couldn't test it there.

 

[pb4uski]

you also have a 10% rate in there 2015 Tax Rate Schedules - Fairmark.com Fairmark.com

True, that is why the effective tax rate (the $6,641/$50,400 or $51k) is less than 15%... more like 13% effective tax rate.... a blend of $18,450 @ 10% and $31,950 @ 15%.