inparadise asks,I hate to be so obtuse on this, but shifting gears from accumulation mode to spending mode means I have much to learn. When you take capital gains, doesn't that go towards your income base? So in other words, if we had $40,000 in TIRA witdrawals and $80,000 in capital gains, would the basis for the tax on capital gains be the $40K or the $120K? Or is what you are saying that by selling $80K in stock, the capital gains may only be $30K when you net out the initial cost of the stock, so we still only get taxed on the $40K in TIRA income, because our total income would only be $70K.</snip>The way the IRS tax worksheet operates, they consider capital gains first.So you'd have $70,700 of capital gains at 0% and $9,300 taxed at 15% for a total capital gains tax of $1,395.Your $40,000 in traditional IRA withdrawals is taxed as ordinary income from $80,000/yr to $120,000/yr which put you in the 25% bracket ($72,500 to $146,400 for a married couple) so you'd pay $10,000 in tax on the $40,000 IRA withdrawal.Overall the $120,000 in income would have $11,395 in tax (ignoring exemptions and deductions.)intercst
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