How do I estimate my capital gains taxes?

Question

Let's say I have 80K in adjustable gross income, and a capital gain of 200K from sale of a non-primary residence real-estate that we have owned for more than one year. The filing status is "married filing jointly."
Here is a link to the 2006 tax schedules:
http://www.irs.gov/formspubs/article/0,,id=150856,00.html

Will I pay "$8,440.00 plus 25% of the amount over 61,300" for the 80K plus 15% of the 200K capital gain?

Or will I pay "$42,170.00 plus 33% of the amount over 188,450" for the entire $280K? So is the 15% capital gains tax an extra tax on the 200K?

I think I'm getting confused because I thought short term capital gains were taxed at a regular tax rate, but long term capital gains got the 5% or 15% tax rate. So how is the 15% applied in combination with the rest of my adustable gross income?

Thank you for any information that you can provide.

Answer 1

Pages 38 and D-1 of the From 1040 instructions have the worksheets to figure taxes when Capital Gain rate limits apply. The process is something like this:
1. Calculate taxable income.
2. Subtract Capital Gains.
3. Figure tax normally on remainder.
4. Apply appropriate rate to Capital Gains.
5. Add amounts from 3 and 4.

Answer 2

Your total gain is $235,000. If you sell only a little bit each year, so that the tax bracket each year for the total of that year's income plus that the gain for that year's sales is in the 10% or 15%, then there is no tax on the long-term gain. If you sell it all at once, then the gain would make you tax bracker higher, so the long-term would be taxed at 15%. Therefore, the tax on a $235,000 gain would be $35,250.

Answer 3

Capital gains from property held over one year are taxed at the 15% rate and not as regular income.

Answer 4

as far as i know, cap gain tax is 15% on your net gain. doesn't matter if its short term or long.

that said, there may be things that will offset that that i don't know about. usually, when dealing with real estate, there are some laws that ease that 15%, but as its a non-primary residence, those laws may not apply.

here's a nifty thought though....this was on my bar exam and is federal income tax law.....if you make a gain on the sale of your Primary Residence and then within a certain amount of time (2 years, i think) reinvest that money in another Primary residence, you won't have to pay taxes on that gain until you sell the new residence....nifty, huh? and there's no limit on it....you could move from house to house to house and never pay taxes on the increase.