So I should save $20 of the $50 gain for additional taxes?No. Just 15%, or $7.50. As Phil said, your capital gain is a part of your gross income, and eventually, your taxable income. But when it comes time to actually compute the tax, the (long-term) capital gain is separated out and taxed at 15% (if you're in the 25% bracket). You might find it instructive to play with some numbers to see how this works. Get a 1040 form and a Sched D, try it with and without cap gains, and see what the difference is. (Note that with cap gains, the tax is figured on a Sched D Tax Worksheet - that's where long-term capital gains are split off and taxed at a lower rate than ordinary income.)(Don't forget that your state will be taxing those capital gains, too - the $7.50 per $50 gain is just for federal taxes.)Lorenzo
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