I took 20,000 out of my mutual funds this year so I know I will have to pay taxes on it. This amount basically doubles what I made in a year...will I get put in a higher tax bracket? Or are the taxes you pay on something like that different from income from working? I'm just trying to get a feel for how much I might owe.
2007-01-22 08:08:04 · 4 answers · asked by agendagal 2 in Business & Finance ➔ Taxes ➔ Other - Taxes
I have had this account for over 20 years, and I have not put any money into it for atleast 2 years. The only activity that it has had is me taking the 20k out this year. When I put money into it, I did not pay taxes on it. I only have to pay taxes now that I've redeemed shares.
2007-01-22 08:42:20 · update #1
It might, but you'd only pay the higher percent on whatever was over the limit for the bracket. And if the gain is long-term (you had it over a year) then it would be taxed at a lower rate than your wages.
To calculate your gain, you need to figure out what you paid for the number of shares that you cashed in, and subtract that from the money you took out. Unless somebody just gave you the shares, you won't pay taxes on the whole $20K. You might also have additional items to subtract, if you had capital gains and dividends from the fund in previous years but reinvested them. The mutual fund company should be able to give you those numbers if you don't have them - tell them you need your basis for the amount you took out. That's what you'll subtract.
2007-01-22 08:41:06 · answer #1 · answered by Judy 7 · 0⤊ 0⤋
If you doubled your investment in the year, that means your taxable gain will be 10,000. Whether it pushes you into the next higher bracket depends on how close you are to the next tax bracket without taking into account the gain. Also, if you have held the mutual fund for more than a year, it is taxed as long term capital gains, so the tax rate is capped below your marginal tax rate anyways.
2007-01-22 08:21:23 · answer #2 · answered by jseah114 6 · 0⤊ 0⤋
No...no...no. That's not how it works. The tax brackets are structured based on earned income. Investment income is taxed at capital gaines tax rates and not on earned income tax rates. Your mutual fund gains (I'm presuming gaines rather than lossess) will not alter your tax bracket.
2007-01-22 09:46:56 · answer #3 · answered by mugwumper 2 · 0⤊ 0⤋
Did you take them out of a taxable account or a retirement account?
How much did you originally pay for the fund you sold?
2007-01-22 08:11:43 · answer #4 · answered by Oh Boy! 5 · 0⤊ 0⤋