whitestick said:
Martha can you provide a link on the exact wording 'cause I just had a CPA tell me that as long as I stayed under the earnings of the particular lowest rate, then I could cash in at 0% all of the LT cap gains. I had hoped that was true, as I do have a bunch of cap gains built up, with 0 cash basis, or nearly so. I had hoped to cash in and use the savings in taxes to live off for the year, and then commence the earnings (like pension, and short term cap gains). Is my CPA all wet?
I found two quotes at Fairmark.com, pasted in below:
Q. I'm concerned that a capital gain will push my other income into a higher tax bracket. Doesn't this mean the real cost of a capital gain is higher than it appears?
A: No, capital gain is "stacked" on top of your other income, so it won't push the other income up into a higher tax bracket. As we pointed out earlier, a capital gain increases your income, and that could cause you to lose a benefit somewhere. For example, your exemptions or itemized deductions might be reduced when you have a capital gain. So there can be some indirect tax costs when you have a capital gain. But your other income stays in the same bracket when you have a capital gain.
This one suggests that you could have higher gains, and get the zero% capgains treatment, as long as your regular income (interest and salary) stayed within the 15% bracket numbers.
But this one below says that capgains make it into your AGI, and count against you for other income-based phaseouts. Still, it says that the capgains portion of income would continue to get treated at its lower rate, which could include, presumably, the zero% rate.
Q: Does a capital gain increase my income?
A: There's a vague notion out there that capital gains aren't income because they're taxed at their own special rates. Folks are hoping, perhaps, that capital gains won't count when they determine whether they can deduct an IRA contribution, or how much of their social security benefit is taxable, or how much of their exemptions are phased out, among other things.
Unfortunately, capital gains are income. A special calculation provides the lower capital gains rate, but doesn't remove capital gains from your overall income (or adjusted gross income).
These came from the page on capgains questions at fairmark:
http://fairmark.com/capgain/basic.htm
If all this is true, it has the strange 'cost' of making your cap loss carryforwards now worthless. It also suggests that there will be a huge amount of buying and selling of appreciated assets: houses, stocks come to mind, by retirees. Possibly even some people taking a year off from work in order to get low salaries and interest that year and then cash o ut whopping big capgains. Then again, maybe they would have been doing that already to get 5% gains under the current law. Am I missing something?
