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Tax Question from Tax Moron
08-10-2020, 06:23 AM
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#1
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Recycles dryer sheets
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Tax Question from Tax Moron
Quick tax question for those Tax Gods out there:
I'm trying to estimate my taxable income for 2020.
If I sell an ETF or mutual fund that has increased in value, and that I've held over a year, I assume that only the LTCG is included in my taxable income? 
So, for example, assuming I have no other income for illustration purposes, if I sell $50,000 worth of ETF shares I've owned for over a year, and my basis is $10,000, then my 2020 taxable income will be $40,000?
(No snickering, please.)
Thanks in advance for your input.
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08-10-2020, 06:27 AM
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#2
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Recycles dryer sheets
Join Date: Sep 2006
Location: clearwater
Posts: 318
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 Quote:
Originally Posted by Mo Money
Quick tax question for those Tax Gods out there:
I'm trying to estimate my taxable income for 2020.
If I sell an ETF or mutual fund that has increased in value, and that I've held over a year, I assume that only the LTCG is included in my taxable income?
So, for example, assuming I have no other income for illustration purposes, if I sell $50,000 worth of ETF shares I've owned for over a year, and my basis is $10,000, then my 2020 taxable income will be $40,000?
(No snickering, please.)
Thanks in advance for your input. |
Correct you will pay tax on the gain, at long term capital gains rates as you have held for more than a year. Long term is a lower tax rate than ordinary income, if you stay in the 15% bracket you may not be taxed at all on the gain. State tax will vary by state. usually taxed at regular ordinary income tax rates,
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08-10-2020, 06:28 AM
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#3
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Recycles dryer sheets
Join Date: Sep 2006
Location: clearwater
Posts: 318
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in your example with no other income, there would be a tax of 0
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08-10-2020, 06:36 AM
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#4
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Recycles dryer sheets
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Got it; but so I'm sure I understand: In my hypothetical, my 2020 taxable income is $40,000, not $50,000?
Thanks.
__________________
“We always may be what we might have been.” -- Adelaide Anne Procter
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08-10-2020, 06:50 AM
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#5
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 27,147
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Quote:
Originally Posted by Mo Money
Got it; but so I'm sure I understand: In my hypothetical, my 2020 taxable income is $40,000, not $50,000?
Thanks.
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Correct. The figure $50,000 will be shown on Schedule D as the proceeds of the sale and capital gain of $40,000 will also be shown on Schedule D. $40,000 will also appear as capital gain income on line 6 of your 1040.
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Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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08-10-2020, 07:14 AM
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#6
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Recycles dryer sheets
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your taxable income is figured after your standard or itemized deduction. which if you are single is 12,400, so AGI is 40k taxable income is 27,600. which is in the 12% bracket. so 0 tax on the federal
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08-10-2020, 07:59 AM
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#7
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 26,941
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Quote:
Originally Posted by Mo Money
Got it; but so I'm sure I understand: In my hypothetical, my 2020 taxable income is $40,000, not $50,000?
Thanks.
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You income will be $40,000 ($50,000 proceeds less $10,000 basis)... your taxable income will be less than $40,000 since it will be after the higher of the standard or itemized deductions based on your filing status.
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If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56...target 65/35/0 AA TBD
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08-10-2020, 08:18 AM
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#8
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Recycles dryer sheets
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Thanks so much, everyone.
__________________
“We always may be what we might have been.” -- Adelaide Anne Procter
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08-10-2020, 09:04 AM
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#9
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Moderator
Join Date: Oct 2010
Posts: 7,044
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I'm afraid you don't qualify for full moron status; a full moron would not have understood the term "basis", and would not have included it in the OP. My broken record response to most tax questions is "type this year's data into last year's tax software for a PDG estimate of how things will turn out"
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08-10-2020, 04:29 PM
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#10
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Dryer sheet wannabe
Join Date: Oct 2015
Location: global_options
Posts: 16
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I use this Kitces article to understand how "income stacking" and taxes work.
Your 1099-B will show total sale amount. In your tax software you enter your cost basis (along with dates) and it calculates gains.
https://www.kitces.com/blog/long-ter...ase-in-0-rate/
Use taxcaster to fine tune your plan.
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08-10-2020, 06:09 PM
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#11
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 26,941
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__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56...target 65/35/0 AA TBD
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08-10-2020, 07:05 PM
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#12
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 22,654
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One wrinkle. If you were having dividends re-invested, you could have some short term gains, you could have some wash sales.
That is why I prefer to not have dividends re-invested unless I'm doing it myself with tax considerations in mind.
-ERD50
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08-10-2020, 07:11 PM
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#13
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Recycles dryer sheets
Join Date: Jul 2014
Posts: 238
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Quote:
Originally Posted by pb4uski
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The dinkytown and (what is apparently the same engine at) mortgagecalculator programs do appear the best of the web sites.
The Excel1040 and Case Study Spreadsheet programs appear the best of the spreadsheets.
"Best" meaning "calculating the most credits and additional taxes encountered by personal filers."
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08-10-2020, 07:55 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Jun 2016
Posts: 4,033
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Quote:
Originally Posted by ERD50
One wrinkle. If you were having dividends re-invested, you could have some short term gains, you could have some wash sales.
That is why I prefer to not have dividends re-invested unless I'm doing it myself with tax considerations in mind.
-ERD50
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If you have gains, short sales do not apply. If you have loses, they may apply and likely on no more than two lots resulting in little consequence especially if you download your tax info.
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08-10-2020, 09:35 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Jun 2006
Location: Boise
Posts: 4,469
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Quote:
Originally Posted by ERD50
One wrinkle. If you were having dividends re-invested, you could have some short term gains, you could have some wash sales.
That is why I prefer to not have dividends re-invested unless I'm doing it myself with tax considerations in mind.
-ERD50
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OP probably could use specific identification to avoid selling the short term lots and/or lots with losses so as to avoid wash sales.
(While I agree with you about not reinvesting dividends for the reasons you mention, the specific ID method can help address them.)
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