LONG TERM CAPITAL GAINS (LTCG)
First, take all of your income including Capital Gains….
Now, assume that figure is all ordinary income… after your itemized deductions and personal exemptions….
This is your theoretical taxable income.
What tax bracket is that?
| Theoretical Ordinary Tax Rate | Long Term Capital Gain Rate |
| 10% or 15% | 0% |
| 25%, 28%, 33% or 35% | 15% |
| 39.6% | 20% |
These LTCG rates in the 2nd column apply only to the LTCG.
i.e. You have TAXABLE income of $255,000 plus LTCG of $175,000, total taxable income $430,000.
Your ordinary income tax would be based on $255,000.
The additional capital gain tax would be based on $175,000.
Married Filing Joint for 2013
Up to $17,850 = 10% ordinary = 0% LTCG
Up to $72,500 = 15% ordinary = 0% LTCG
Up to 146,400 = 25% ordinary = 15% LTCG
Up to 223,051 = 28% ordinary = 15% LTCG
Up to 398,351 = 33% ordinary = 15% LTCG
Up to 450,000 = 35% ordinary = 15%LTCG
Greater than 450,000 = 39.6% ordinary = 20% LTCG
The tax on the LTCG is $175,000 x 15% = $26,250.