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Forum » More General Categories » Education/Career/Finance » Why am I Taxed on 0% Long term Capital Gain?
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Thread: Why am I Taxed on 0% Long term Capital Gain?

post 1630543093 02-04-2021, 01:22 PM
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Why am I Taxed on 0% Long term Capital Gain?

If I sell a stock right now, I turned $4k into $50k profit. Ive held this stock for over a year. When I calculate the taxes on a long term capital gains calculator, it says I have to pay federal taxes even though my taxable income is below $40k.
post 1630547373 02-04-2021, 02:09 PM
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If your taxable income is low enough, your LTCGs rate is 0%.

https://www.forbes.com/advisor/inves...tal-gains-tax/

This says if your filing status is single and you make less than $40k, you'll pay 0% (2020)

Funny enough, the IRS says here the limit is $80k, but despite it being from the horses mouth - I don't believe it.

https://www.irs.gov/taxtopics/tc409
The tax rate on most net capital gain is no higher than 15% for most individuals. Some or all net capital gain may be taxed at 0% if your taxable income is less than $80,000.
post 1630566173 02-04-2021, 05:51 PM
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I’m pretty sure you can’t just have under 40k income and realize unlimited long term capital gains at 0% which it sounds like you are thinking. I believe it’s added to your income to find out what bracket the gains are taxed in. So if your ordinary income is 30k then 10k of your 50k would be at 0% and the remaining in the next bracket.
post 1630566343 02-04-2021, 05:53 PM
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Originally Posted By xpin2winx⏩
If I sell a stock right now, I turned $4k into $50k profit. Ive held this stock for over a year. When I calculate the taxes on a long term capital gains calculator, it says I have to pay federal taxes even though my taxable income is below $40k.
You have to pay taxes on the $46K you gained because it is considered income.

You are now in the $86k tax bracket.
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post 1630602163 02-05-2021, 06:07 AM
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Originally Posted By FFailed⏩
I’m pretty sure you can’t just have under 40k income and realize unlimited long term capital gains at 0% which it sounds like you are thinking. I believe it’s added to your income to find out what bracket the gains are taxed in. So if your ordinary income is 30k then 10k of your 50k would be at 0% and the remaining in the next bracket.
This

It gets added to your current income. This is why investing long term for retirement and not pulling out while still working is more beneficial.

Here is a good explanation:

https://www.nerdwallet.com/article/t...ains-tax-rates
"One day I won't be able to lift any more. Not I won't want to lift. I mean physically unable. That day could be decades from now or it could be tomorrow. All I know is that's the day I'll wish I could lift more than ever. The day I'd give anything for one more workout, one more set, or one more cardio session. So go hard and enjoy every workout, every set, every rep. Because one day you will wake up and you will never get it back."
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post 1630673653 02-05-2021, 10:00 PM
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Originally Posted By SoutheastBeast1⏩
This

It gets added to your current income. This is why investing long term for retirement and not pulling out while still working is more beneficial.

Here is a good explanation:

https://www.nerdwallet.com/article/t...ains-tax-rates
The article itself doesn't say that long term capital gains are counted towards income. The calculator on the website however does. Every other article I read says that as of 2020 long term capital gains are counted towards taxable income.

Im positive you are right though. I feel like I should move to a state that doesn't tax capital gains at the state level. Stupid new Jersey.
post 1630674083 02-05-2021, 10:08 PM
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Originally Posted By xpin2winx⏩
If I sell a stock right now, I turned $4k into $50k profit. Ive held this stock for over a year. When I calculate the taxes on a long term capital gains calculator, it says I have to pay federal taxes even though my taxable income is below $40k.
Bruh what happens if I just don’t pay? how would they even know I cashed out

Also you can withdraw in an offshore bank
post 1630674583 02-05-2021, 10:17 PM
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Originally Posted By gesten⏩
Bruh what happens if I just don’t pay? how would they even know I cashed out

Also you can withdraw in an offshore bank
lmao

bruh
post 1630677543 02-05-2021, 11:15 PM
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Originally Posted By gesten⏩
Bruh what happens if I just don’t pay? how would they even know I cashed out

Also you can withdraw in an offshore bank
They send a duplicate of your forms to the IRS.
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post 1630690863 02-06-2021, 07:43 AM
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So the capital gains tax rate is 0% if your income is under $40k...

If I'm interpreting this correctly, if your W2 income is $30k, and you have $11k in capital gains, you pay 0% tax on $10k of those capital gains (up to $40k between income + capital gains), and still pay 15% capital gains tax on remaining $1k of those gains, right?
post 1630713023 02-06-2021, 01:58 PM
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Originally Posted By SouthDakotaBrah⏩
So the capital gains tax rate is 0% if your income is under $40k...

If I'm interpreting this correctly, if your W2 income is $30k, and you have $11k in capital gains, you pay 0% tax on $10k of those capital gains (up to $40k between income + capital gains), and still pay 15% capital gains tax on remaining $1k of those gains, right?
I typed that into the long term capital gains calculator and that's what it says. However they do a piss poor job of explaining it on the websites listed. Literally all it says on those websites, if you make less than $40k then you pay 0% on long term capital gains, and long term gains are taxed separately from taxable income. It's stupid that they didn't put in the articles that you have to add your gains to your taxable income. But anyways, looks like I'm maxing out my traditional 401k this year, so I don't have to pay federal taxes on sold stock.
post 1630713143 02-06-2021, 02:00 PM
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Originally Posted By pondus_levo⏩
They send a duplicate of your forms to the IRS.
Uncle Sam always gets his...
Age: 30

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post 1631088653 02-10-2021, 07:45 PM
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Even if you are in 0% Federal. You still might have to pay state taxes.
post 1631327613 02-13-2021, 06:40 PM
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Originally Posted By BeginnerGainz⏩
Uncle Sam always gets his...
This is true, a few years ago I made a couple thousand doing some scalping on stocks and figured it wasnt really enough to worry about so I didnt bother to claim it on my taxes. A couple months after I filed I got a tax bill for 270K because Ameritrade cucked me.
Live & Direct from rural Iowa- GBR
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