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In today's Foolish Four column, the author stated that the rate for long term capital gains depended entirely on one's income (either 10% or 20%), and that reducing one's income enough to hit the 15% bracket would drop your lt cap gains rate.

Earlier this year, I tried to figure out this very question by going over the 1040 and Schedule D, and it seemed to me that isn't how it works. The capital gains themselves are included as income, so someone in the 15% bracket pays 10% on the long term cap gains amount up to the cutoff for the 28% bracket, and pays 20% on the remainder.

It was fairly confusing, so I'd like to know if I was right, and the FF article was wrong.

Never go on an adventure without a hat!
Indy

http://users.interconnect.net/indy/

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