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[[Again, I'm not sure that I'm answering the question you are asking...or if I really understand the question. But look at it this way: Let's say that you had only $5k of income, and $50k of long term capital gains. Not ALL of the cap gains would be taxed at the 10% preferred rate. Again, using your "cut off" rates, the first $5k would be taxed at 15% ordinary rate, the next $5k in long term gains would have a preferred rate of $10%, and the remaining $45k of long term gains would be taxed at the preferred rate of 20%. ]]

Thanks, that takes care of my question exactly. I was bored at work today and so played around with the 1040 and schedual D on my own too, and came up with the exact same thing.

-short term gains are taxed like normal income
-if, including short term gains, your tax rate is still in the 15% bracket, then your long term gains until you have "filled up" this bracket are taxed at 10%
-any remaining long term gain is taxed at 20%

For example, I followed through the forms with $20k short term gains, $40k long term gains, and $500 for both intrest gains and dividends, and used the '98 values for a single person. This gave a tax of $8981, so only 14.7% of the total $61k. If the values were changed slightly to have all gains from LT, then the tax is $8275, or 13.6%. Not too big of a difference. But, this would change a lot more if you went the other way. With the breakdown of 40k ST and 20k LT, it comes to $10246, or 16.8%. This will be helpful for me (and others) to remember when looking at LT vs ST investments and trading.

[[Why wait?? Read my post in the Taxes FAQ area about estimated taxes. You'll get the backround that you need.]]

That's exactly the "research" that I also did today. Looks to me like since my goal is a 30% return, (I've been doing much better than that :) that I might as well just file as normal and let the IRS figure out the exacts on the 9% intrest that I owe them for not paying in increments throughout the year. I think this is what you suggested in the Tax FAQ (which is a great resource, BTW)

Thanks for the help and confirmations. Often it's hard to know if what you think is right really is.

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