LTCG rate on collectables

[joesxm3]

Trying to Google I get statements such as LTCG rate capped at 28% or LTCG rate up to 28%.

Normal LTCG rate is 0%, 15%, 20% based on income.

Are all collectables taxed at the 28% rate or is it indexed to income?

Does it mean that if you reach the 20% rate on normal LTCG it is 28% on collectables, but if your income is low enough it might still be 0% or 15%?

Also, sales tax paid when purchasing a collectable increases the basis, right?

 

[SecondCor521]

It's very confusing.

For collectibles, I think you want to start with the 28% rate gain worksheet here:

https://www.irs.gov/instructions/i1040sd#en_US_2022_publink100045221

The output of that worksheet ends up on Line 18 of schedule D. And then you're instructed to fill out the Schedule D worksheet:

https://www.irs.gov/instructions/i1040sd#en_US_2022_publink100045219

where the Schedule D line 18 becomes an input on line 11 of that worksheet. Beyond that it's hard to follow the bouncing ball, and I'd suggest just putting in your numbers and working the worksheet to see what happens.

Yes, sales tax would add to basis.

 

[audreyh1]

I think it’s always 28% on collectibles.

 

[cathy63]

Here are a couple of sample tax returns that will show you how it's taxed.

"interest-only" is for a single person whose only taxable income is $182,100 of taxable interest. That's the exact top of the 24% bracket for a single person. His tax is $37,104.

"collectibles" is for a single person whose only income is $200,000 gain on a sale of collectibles. I picked that number because some of it is in an ordinary bracket higher than 28% but not high enough to be subject to NIIT. His taxable income is $186,150 and his tax is $38,238.

You can look at the Schedule D worksheet in the collectibles return which was filled out by the software I used (TaxSlayer). You can also see that the difference in the two tax amounts is $1134, and that is exactly 28% of $4050, which is the difference between the two incomes. Clearly the collectibles tax is calculated as ordinary income tax up to the point where the tax bracket would exceed 28% and then it is capped at that amount.

 

[joesxm3]

Thanks for the info.

I have not yet sold anything but I hope to declutter this year.

I guess I will let turbo tax figure it out when the time comes. The amount I might sell will be a rounding error on my return anyway.

 

[audreyh1]

We only paid it once when DH sold a Rolex he bought in the 70s. This must have been in the early 2000s.

 

[Koolau]

Sounds like a real bummer paying high taxes on collectables. We sold all our collectables years ago and most were losses (way more than our gains, in any case.) Just a fun hobby that we've now grown out of, I guess. Fun while it lasted but that was then...



Virtually anything we "get rid of now" is donated, but YMMV.