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Author: klinedanner Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Confused and Worried Date: 10/24/2000 2:22 PM
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Help. I've been pouring over the various articles on the Fool related to taxes. I've learned a lot and become confused at the same time. It all started with a desire to know what i would pay in capital gains if i owned a stock for less than a year. Here's a quote from a Fool article that has me wondering what's up:

- Gains on assets held for a year or less are taxed at your ordinary income tax rate (anywhere from 28% to 39.6%, depending on your specific ordinary tax rate).

- Gains on assets held for more than a year are taxed at a reduced tax rate of 20%.


Well, i wasn't sure where i fell, so i went to the IRS site. I got married this year, and my wife and i will be filing a joint return. The "Tax Rate Schedule" ( http://www.irs.gov/prod/ind_info/tax_tables/tax_sched.html ) puts our combined income at the 28% bracket. HOWEVER, that web page says do NOT use the table if your gross income is LESS than 100K (that's certainly us). It instead points you to the "Tax Tables." Well, over there, the tax it says we pay is 17.4% of our income.

I think you can see my confusion. Apparently, we're not in the 15% bracket OR the 28+% bracket. Since our federal income tax is 17.4%, less than the 20% "reduced" rate for those outside the 15% bracket, will i pay 17.4% on my capital gains, regardless of how long i hold the investment?

To add insult to injury, i divided the amount next to "Federal Witholding" on my paycheck stub by my taxable income for the pay period and got about 10%. Does that mean my employer is only witholding 10% of my pay for federal taxes, meaning i'll get SLAMMED come tax time owing a huge amount, or am i just missing something?

Please HELP! Thank you in advance...
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