2008 cap gains taxes: zero in 10% & 15% income-tax brackets

[justin]

I think page 2 of form 1040, schedule D lays out how to calculate taxes on capital gains. Run through that with some hypothetical numbers (but change the 5% tax to 0%) and you'll see what you'll pay. Unless the method of computing your CG taxes changed?

 

[Martha]

A schedule D worksheet was in the link I provided.

Actually there are a lot of online calculators that will do the same thing, like the dinkytown calculators.

 

[Nords]

A schedule D worksheet was in the link I provided.

That and the estimated taxes cap-gains worksheet kick my butt every year. Apparently I can chug through the forms without a clear comprehension of where they're going. Sort of like reading a road map...

Well, back to the Roth IRA conversion plan. But we might still cash out some of those Tweedy gains.

Bob, cap gains losses might be worthless for a few years, but who ever tries to preserve their cap losses? I'd probably be better off selling the cap-loss stock and putting the money in a CD.

 

[audreyh1]

My wife recently told me "Wow look at those neat red computers Dell has now.  I think we need one of those!  It looks prettier than the blue one we have now."  No wonder women get hoodwinked at the car lot and at the computer store. 

You watch it Justin!! It's just some women (and men) who get "hoodwinked" by glitz.

Audrey

 

[laurence]

Because the IRS is always behind in its pubs.  

The married filing joint cut off for the 15% bracket is 61,300 for 2006.

http://www.irs.gov/formspubs/article/0,,id=150856,00.html

O.K., so wait a second, my retirement account withdrawals will be taxed as ordinary income, right? So if I withdraw 61,300 or less a year I'm paying 15% marginal and really, less than that on average? And we also don't have to pay SS or Medicare out of it, right? This could be great news, because with the house paid off we can live quite comfortably on 61,300! They are adjusting this rate for inflation, right?

 

[retire@40]

... So if I withdraw 61,300 or less a year I'm paying 15% marginal and really, less than that on average?...

$61,300 is taxable income, so you could withdraw much more, depending on your situation.  More like around $78K or more if you itemize.

 

[Scrooge]

O.K., so wait a second, my retirement account withdrawals will be taxed as ordinary income, right?  So if I withdraw 61,300 or less a year I'm paying 15% marginal and really, less than that on average?  And we also don't have to pay SS or Medicare out of it, right?  This could be great news, because with the house paid off we can live quite comfortably on 61,300!  They are adjusting this rate for inflation, right?

Er, yes, it does get adjusted periodically, but <cue ominous music> not just for inflation 

 

[maddythebeagle]

It sure would be nice if this becomes permanent....put another divide between the wage slaves and folks living off of investment income...

 

[ESRBob]

O.K., so wait a second, my retirement account withdrawals will be taxed as ordinary income, right? So if I withdraw 61,300 or less a year I'm paying 15% marginal and really, less than that on average? And we also don't have to pay SS or Medicare out of it, right? This could be great news, because with the house paid off we can live quite comfortably on 61,300! They are adjusting this rate for inflation, right?

Laurence,
Don't forget, though, that these withdrawals wont be the only income you have in those years. You'll have portfolio earnings (interest), some capgains etc in your taxable savings, you'll have Social Security, and if you've been good about socking money away, you may have bigger-than-minimal RMDs (Required Minimum Distributions) to flush out a million dollar+ IRA over the course of your remaining lifetime. When I did calcs on RMDs, I was shocked at how big they can grow, given that your IRA will continue to be compounding and growing, so as you get older the RMDs can really add up.

Thx Martha for clearing up the way these gains are handled. Looks like there is less to this tax cut than meets the eye. Why am I not surprised?

 

[whitestick]

It sure would be nice if this becomes permanent....put another divide between the wage slaves and folks living off of investment income...

Ah, but it also keeps your taxes higher when your retirement is based on the IRA/401k, pension, and SS that is the bulk of most retirement investments currently planned for.
Thanks Martha and others for the info. Thought it sounded too good to be true.

 

[laurence]

Laurence,
Don't forget, though, that these withdrawals wont be the only income you have in those years. You'll have portfolio earnings (interest), some capgains etc in your taxable savings, you'll have Social Security, and if you've been good about socking money away, you may have bigger-than-minimal RMDs (Required Minimum Distributions) to flush out a million dollar+ IRA over the course of your remaining lifetime. When I did calcs on RMDs, I was shocked at how big they can grow, given that your IRA will continue to be compounding and growing, so as you get older the RMDs can really add up.

Thx Martha for clearing up the way these gains are handled. Looks like there is less to this tax cut than meets the eye. Why am I not surprised?

Oh, absolutely, but this bit makes the "stretch" between when I ER and when Social Security kicks in a little less painful!

 

[cute fuzzy bunny]

As I always say, I hope my biggest pain in the butt when i'm in my 60's+ is too damn much income and all the associated tax hassles

 

[2B]

As I always say, I hope my biggest pain in the butt when i'm in my 60's+ is too damn much income and all the associated tax hassles

I agree. If the only thing I need to fix a problem is money, it really isn't that much of a problem.