funny ,i was just replying on another thread to this exact same thing.
capital gains are first figuerd on schedule d with results put on your 1040.
michael kitces gave a good explanation as to how the zero capital gains tax brackets work. it can be tricky as to how it is calculated when you have other ordinary income .
a couple today can have 50k in income and have a 50k long term capital gain and pay as little as 4-5% effective tax rate on everything in total to the fed.
but remember state taxes you fully on that 100k income less deductions and the special capital gains rates do not apply.
when you have other income the ordinary income fills up the tax brackets first .
as michael illustrates with the tax brackets of 2014 , a couple with 50k ordinary income and 50k in long term capital gains will have 50k in income less about 23k in standard deductions and exemptions so they will 29,700 in taxable income that the 50k in capital gains go on top of.
the first 18,250 in in ordinary income fills the 10% bracket , the next 11,550 falls in the 15% bracket.
the next 44,100 in capital gains falls in the 0% bracket since up to 73,500 of income falls in the zero % bracket. the last 5900 of that capital gain gets taxed at 15%.
so you see that 50k capital gain had only a very small part being taxed by the fed. the couples total tax bill will be about 4500.00 bucks to the fed on 100k in income.
the couple’s total tax bill will be only $18,150 x 10% + $11,550 x 15% + $5,900 x 15% = $4,432.50, or an effective tax rate of only about 4.4% on $100,000 of total income!
https://www.kitces.com/blog/understa...p-up-in-basis/
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