Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: Re: A foolish situation. Date: 2/9/2000 4:03 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
<< Okay, let's say that I had a very good year and out of foolishness (or stupidity, take your pick), sold enough in my positions to realize short-term capital gains totaling $100,000 for the year. I am in the 15% tax bracket. Let's assume that my Adjusted Gross Income before the gain is included is $25,000. With the proceeds from the gain, I put down $60,000 on a $120,000 house and finance the remainder.

Realzing that this is, to say the least, a foolish situation, what are the tax implications here? Is the entire $125,000 Adjusted Gross Income taxed at 39.6% (or higher) or is there a double whammy of 28% on the $100,000 and 39.6% on the remaining $85,400? >>

"Tax bracket," a/k/a your "marginal" rate, is the percentage at which your LAST dollar of income is taxed. It's really not a terribly useful figure, but it seems to be very important to a lot of people. To see how much you're really paying in income tax, divide the total tax on the return by your total income.

All dollar amounts from here out are for Single filing status and 1999 taxes. The numbers are different for each filing status and each year, and can always be found in the Tax Rate Schedules in the 1040 instructions or the 1040-ES instructions for the current year. Your tax is computed on your taxable income. You get to taxable income as follows:

Gross Income - Adjustments to Income = Adjusted Gross Income (AGI)
AGI - exemptions ($2750 each) - Standard ($4300) or itemized deductions = taxable income.

The first $25,750 of taxable income is taxed at 15%. The next $36,700 is taxed at 28%. The next $67,800 is taxed at 31%. The next $152,900 is taxed at 36%. Finally, for those really wondering where their next meal will come from, taxable income above $283,150 is taxed at 39.6%.

There are some special ways of computing tax, for example when there are long-term capital gains, but this is the basics.

Phil Marti
Tax Preparer

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement