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Does this mean salary goes first and everything else after? Meaning, salary works through the sliding scale up to your final tax bracket (28% here). Then what ever other income you have goes into that top bracket.

Another way of looking at it: Why didn't the $1000 get taxed in the 15% bracket (first bracket) and then add salary on top of that?


Had you been paying attention in Algebra class you'd remember that addition and multiplication are both commutative and associative. IOW, either way you calculate it, with only short-term gains the answer is the same.

When long-term capital gains are involved, there is an ordering. Oversimplified, the capital gain is removed from taxable income. You then calculate tax on the remainder. This starts from the beginning, using up first the 10%, then the 15%, then the 25%, etc. brackets. If that hasn't used up the 15% bracket, the amount of your long-term gain that's needed to take you to the top of that bracket is taxed at 5%. The balance is taxed at 15%. Add everything up, et voila!

Phil
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