Ask Terry Questions tax brackets on capital gains

tax brackets on capital gains

By Terry Savage on February 07, 2016 | Taxes & Economy

you mentioned in a brief article dated oct 2015 that the tax rates that one pays on capital gains are determined by your tax rate bracket. is the tax rate bracket the one you have typically been in over many years or is it the one you would be when calculate doing your 2015 return? if its 2015 do you leave out the gain/loss in the sale the sale of rental property to first in determing your bracket? my taxable income is well below the $74,900 amount if I don’t include the condo sale. the bracket that would result if I included the sale would be my tax bracket for only one year and of course be much higher. thanks for your reply

Terry Says:  Every year the income level for various tax brackets changes a bit based on inflation adjustments.  Here are the tax brackets effective for 2016.    If you sold an investment property, whether for a gain or loss, in 2015, that will be reported on your 2015 return, which will be due this April.  I’m going to suggest you consult a CPA  (certified public accountant) for advice on how the gain will be taxed.  It may depend on whether you had taken any depreciation over the years (writeoffs against ordinary income) that now must be “recaptured” as an adjustment against the amount of your capital gain.

I know you are asking about your tax bracket and whether the gain is included.  The basic answer is “yes” — the gain is included in your income, and then taxed at the rate applicable to that tax bracket.  But there are so many other ways to deal with this, that I encourage you to consult a tax professional.  (And don’t forget that taking this gain might impact many other things, including the monthly amount you pay for Medicare, or perhaps disqualify you from other federal and state benefits.  So a tax advisor might have some thoughts about spreading out the gains over a period of years as you create your deal with the buyer.)



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