Whats my Capital Gains for 2007 5% or 15%?

Question

My taxable income is 31k, right below the 25% tax bracket (for 2007 $31,850), so I think I should still get the 5% tax treatment for capital gains. If I have 5k in cap gains will I pay 15% or 5% on them or a combination of both? Just looking at a 1040 it is not obvious to me.

At first I thought I would only pay 5% too, untill I looked at a 1040 which made me think that the gains would put me into 25% bracket, just for cap gains tax.

My 31k of taxable income does not include any of my capital gains

Answer 1

The computation you need is the Qualified Dividends and Capital Gains Worksheet which is in the Instructions to Form 1040 (page 38):

http://www.irs.gov/pub/irs-pdf/i1040.pdf

I am assuming your have long-term capital gains of $5,000.

If you are right at the top of the 15% bracket, not including the capital gains, you will pay the full 15% tax on your $5,000 capital gains.

If you are in the 15% bracket including your capital gains, you will pay 5%.

There are a few exceptions to deal with like investment expenses, see the worksheet if this applies.

Answer 2

The next bracket below the 25% tax bracket is the 15% bracket. Capital gains taxes are maximum of 15%, but are 5% for those in either the 10% or the 15% bracket. Since you say you are in the 15% bracket, your capital gains for 2007 would be 5%. Just to let you know, the rate goes from 5% to 0% in 2008 for those in the 10% or 15% bracket.

Answer 3

If you are saying that your taxable income INCLUDING the capital gain amount has you in a 15% bracket, then it's 5%. If the amount just below the 15% bracket limit doesn't include the capital gain amount, then you'd have to add that on and it would probably push you over the limit so you'd owe 15% instead.

Answer 4

If you're unmarried and make $20K in wages and promote inventory with a $10K acquire, you're going to pay $zero at the capital acquire seeing that your salary sales and the acquire are not up to the begin of the 25% tax bracket. if you're unmarried and make $40K in wages and promote the identical inventory with a $10K acquire, your taxable sales without or with the inventory is already within the 25% tax bracket, so that you pay $1500 (15%) at the LTCG. Or appear on the worksheet in 2007 guideline ebook and photograph how the maths might paintings if the primary multiplier was once zero as an alternative of .05.

Answer 5

ok... you will pay 5%.