How are long-term Capital Gains treated for year 2006?

Question

Im trying to fill out tax return for year 2006, but Im having trouble handling long-term capital gain. If i report full amount of long-term capital gain on line 13 of the 1040 tax return, I will be on high tax bracket. I heard that long-term capital gains are treated differently based on which tax bracket your taxable income is on. Do i include capital gain on adjusted gross income to arrive at taxable income so i can determine which tax bracket i am on or do i calculate taxable income without including capital gain to determine which tax bracket i am on so i can handle capital gain favorably if i am on low tax bracket?

Answer 1

you should be using tax software to calculate your tax, especially when you have different tax rates.

long-term capital gain should be reported on Schedule D. it is taxed at 15%

it is included in your adjusted gross income to come up with taxable income. however, the tax calculation is separate.

Answer 2

You will use the schedule D tax worksheet to calculate your taxes. This essentially calculates your bracket while including the LT capital gains, then backs them out and calculates taxes on your other income, then calculates taxes on the LT gains at the reduced rate then adds the two back together to get your total tax.

Answer 3

You need to figure your income with CG's included. But report income first...........don't add anything together until you get to line 13. It sucks but unless you have deductions that will balance it out than you will end up in the higher bracket.