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  1. #1
    Registered User xpin2winx's Avatar
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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.
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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.
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    Registered User FFailed's Avatar
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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.
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    Originally Posted by xpin2winx View Post
    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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    Originally Posted by FFailed View Post
    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
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    Registered User xpin2winx's Avatar
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    Originally Posted by SoutheastBeast1 View Post
    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.
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    Registered User gesten's Avatar
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    Originally Posted by xpin2winx View Post
    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
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    Registered User goonsondeck's Avatar
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    Originally Posted by gesten View Post
    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
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    mic dropper pondus_levo's Avatar
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    Originally Posted by gesten View Post
    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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  10. #10
    SUPERNOVA SouthDakotaBrah's Avatar
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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?
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  11. #11
    Registered User xpin2winx's Avatar
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    Originally Posted by SouthDakotaBrah View Post
    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.
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    Registered User BeginnerGainz's Avatar
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    Originally Posted by pondus_levo View Post
    They send a duplicate of your forms to the IRS.
    Uncle Sam always gets his...
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    Even if you are in 0% Federal. You still might have to pay state taxes.
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    Originally Posted by BeginnerGainz View Post
    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.
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