wjbjr[at]webtv.net (William Brenner) writes:
- quote -

Yes, I typoed in the subsequent post. The $10 should
have been $15, and then correct the rest of the numbers
going forward.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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smithff33[at]aol.com (Herb Smith) wrote:
- quote -

Yes, but the AGI is changed by the capital gain income.

Take a representative taxpayer. Add $10,000 long term
capital gains. With the LTCG tax rate at 15%, you would
expect a $1,500 tax increase. But holding everything the
same except for adding the 10K LTCG, if the taxpayer is in
the itemized deduction phase-out range the tax increase
could be $1,584 to $1,605. If the taxpayer is also in the
personal exemptions phase-out range, the tax increase could
be $1,754 to $1,847. If the taxpayer is only in the child
credit phase-out range, the tax increase could be $2,000.
For retired taxpayers who are within the taxable social
security phase-in range, the tax increase could be from
$2,250 to $2,775. Throw in an AMT scenario and the tax
increase could be $2,150 (even though AMT LTCG stated tax
rate is also 15%). Throw enough deductions into the
scenarios and all the above amounts could be $1,000 lower
(including the original $1,500).

All these phase-in and phase-out ranges make for "back-door"
tax increases whereby the stated tax rates can be
misleading, even with respect to LTCG. For most taxpayers
with modest LTCG's, it is reasonable to say that the LTCG
tax rate is "around" 15%. But I would run a projection for
anyone who might be hitting a phase-out or phase-in range
before stating how much tax they will owe. (And always
consider that a large LTCG will often trigger an AMT
situation because there is less rate differential to cushion
it.)

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Rich Carreiro wrote, regarding long term capital gain rates:
- quote -

Rich Carreiro wrote in a subsequent post, in part:
- quote -

This leaves me a bit confused. Am I missing something?

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Herb Smith at smithff33[at]aol.com wrote on 11/17/04 10:13 PM:
- quote -

I have done some tax scenarios testing increases in capital
gains. The question I was trying to answer was, "How much
more tax will result with the addition of a given amount of
LTCG." The answer is not always the same. 2003 Example:

Base level of income:
Wages = $3,800
Interest = $200
Dividends = $24,762 ($24,601 qual.)
Self employment = $37,000
IRA distribution = $32,159
Pension distribution $42,000
Adjustments = ($5,942)
AGI = $133,979

Less Itemized deductions $31,864
Less personal Exemptions $6,200
Taxable Income = $126,553
Tax = $14,996
AMT = $0
Self-Employment Tax = $5,228
Total Tax = $20,224 = 15% AGI

Add 1st $100,000 LTCG increases tax $19,464
AGI = $233,979
TAX = $39,688 (16.9%)
Includes AMT $3,539

Add 2nd $100,000 LTCG increases tax $21,500
AGI = $333,979
TAX = $61,188 (18.3%)
Includes AMT $8,039 (up $4,500)

Add 4th $100,000 LTCG increases tax $15,000
AGI = $533,979
TAX = $94,919 (18.7%)
Includes AMT $10,207 (down $750)

Add $1,000,000 LTCG increases tax $152,446
AGI = $1,533,979
TAX = $247,356 (16.13%)
Includes AMT $10,044 (down $163)

The effects of the phasing out of itemized deductions,
personal exemptions and AMT exemption because of various
levels of AGI very much affect these scenarios. Rates in
these examples vary all the was from 15% to 21.5% for
additional capital gains. The good news is that somewhere
around $300,000, all the bad stuff that is going to happen
already has happened and from there on, the rate on long
term capital gains is about 15%, no matter how much you
take.

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA

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naneklund[at]aol.com (Nan Eklund) wrote:

- quote -

Why should the CG tax rate have anything to do with the
items mentioned? CG taxes are calculated AFTER personal
exemptions and itemized deductions are taken into account;
the AGI is unchanged by the LTCG rate.

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naneklund[at]aol.com (Nan Eklund) writes:

- quote -

It's not too hard to do that.

For example, assume you have medical deductions in excess of
7.5% of AGI, that your AGI is not high enough to be in the
itemized deductions phaseout range, and that you are in the
25% bracket. Now assume you pick up $100 of LT capital
gain. That will increase your AGI by $100, which will
reduce your allowable medical deductions by $7.50, which
will increase your ordinary taxable income by $7.50. The
tax on that incremental $7.50 of ordinary taxable income
will be $1.88 and the tax on $100 of LT cap gain will be
$10. So the total tax increase caused by picking up $100 of
LT cap gain is $11.88, meaning the true marginal rate is
11.88% rather than 10%. A similar analysis holds for misc
deductions and the 2% thing.

Now let's assume you have medical deductions, misc
deductions and you're in the itemized deductions phaseout
range (which is a 3% phaseout if I remember right) and in
the 30% bracket. The extra $100 of LT cap gain will again
increase AGI by $100, which means allowable medical
deductions drop by $7.50, allowable misc deductions drop by
$2.00, and then another $3.00 of deductions are lost due to
the phaseout. So deductions drop by $12.50, increasing
ordinary taxable income by $12.50. The tax on that is
$3.75, and the tax on the LT gain is again $10, for a total
incremental tax of $13.75, resulting in a true marginal rate
of 13.75%.

Or, if you trust your tax software and don't like math or
algebra, just pick some relevant returns from last year,
stick in a $100 cap gain distribution, and see how much the
total tax increases by.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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It would be helpful to be able to figure out what the
capital gains income included in AGI does to things like:
itemized deductions, personal exemptions, medical 7.5% and
misc 2%.

I can say all I like about capital gains rates being lower
now - but the other effects come back and slap my
predictions in the b___.

Nan, EA in LA
Entrenched belief is never altered by the facts.....

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According to SmartMoney.com, the capital gain rates are:

0%
Homeowners who owned and used their home as a main residence
for at least two years before selling; some shareholders of
small-business stock.

5%
For sales after May 5, 2003, individuals in the 10% and 15%
federal income tax brackets with net long-term capital gains
from selling investment securities held for more than one
year.

8%
Investors in the 10% or 15% income-tax bracket who held a
security for more than five years and sold before May 6,
2003.

10%
Investorss in the 10% or 15% income-tax bracket who held an
investment for more than one year and sold before May 6,
2003

15%
For sales after May 5, 2003, individuals in the 25% federal
income tax bracket or higher with net long-term capital
gains from selling investment securities held for more than
one year. (For sales before May 6, 2003, you pay 20% on net
long-term capital gains that would otherwise fall within the
25% or higher bracket.)

20%
Anyone in the 25% income-tax bracket or higher who held a
security for more than one year and sold before May 6, 2003.

25%
Unrecaptured Section 1250 gain (straight-line depreciation).
Property owners and real estate investment trust (REIT)
investors in the 25% income-tax bracket or higher who hold
property for more than one year.

28%
Collectors in the 28% tax bracket or higher; some
small-business stock shareholders.

Nobody pays more than their marginal rate.

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angelspiritunite[at]aol.com (AngelSpiritUnite) wrote:

- quote -

Not since May 2003

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"AngelSpiritUnite" <angelspiritunite[at]aol.com> wrote:

- quote -

Oh really?

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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It is 20%

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taxservice[at]aol.compliance (John H. Fisher) writes:

- quote -

It's 5% and 15%, not 10% and 15%.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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someone[at]somedomain.com.invalid wrote:

- quote -

http://www.moneychimp.com/features/capgain.htm

--
Alan
http://taxtopics.net

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- quote -

True 'n' your losses offset your gains.

LONG TERM GAINS are taxed at 10% if you're in the 15% income
tax bracket and 15% if you're in the 25% or higher tax
brackets.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Maybe some body can tell me.

Got a couple stocks that are really moving this year.
I want to sell them but am wondering what the capital
gains max amount is.

Got 6000 GRA at 3.40 which is hitting 15.00 Also
have 10,000 UNRW at .65 which is heading to 4.00. I was
told 15% max for long term Cap gains.

If it's true I'll be happy with it. Got a couple loosers to
dispose of.

Appreciate the help

Thank

John

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