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Subject:  Deductions on capital gains? Date:  10/25/2013  6:32 PM
Author:  luke77 Number:  119411 of 127513

Hi all,

I have two questions about the tax treatment of capital gains. I returned to school this year to complete a graduate degree, meaning that I have zero income for the year. However, I have about $100K in unrealized long-term capital gains that I am thinking of selling, partly because I think that my capital gains taxes would be lower given that I have no income. I'm unsure, though, about a few things regarding how the capital gains would be treated.

I've read that your capital gains rate depends on your tax bracket - the 10 and 15 percent bracket has a zero percent rate for LT gains, and all other brackets have a 15% rate. I'm wondering, though, do the capital gains themselves raise one's tax bracket? Since I would have $100K in gains, would this bump me up to the 33% (or whatever) tax bracket, and thus raise my capital gains rate to 15%? Or are capital gains treated entirely separately from income, and my tax bracket would be the zero percent bracket?

Along those lines, can I reduce my tax burden on capital gains the same way I would be able to with income, through charitable giving? In other words, if I have a capital gain of $100,000 and I give $25,000 to charity, can I deduct this from the capital gain so that I am only taxed on $75,000? Or are you only allowed to deduct from ordinary income?

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