Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 8
You would need to have $105,900 in LTCG to start paying taxes.

Here, let me phrase that a little differently:

For MFJ using the standard deduction, you would have to have $105,900 in total income before LTCG and qualified dividends would start being taxed.

Note: If you have more than $25,100 in ordinary income, you will pay taxes on that ordinary income. Also, the numbers will vary for those with other filing statuses and/or using a deduction other than the standard deduction.

AJ
Print the post Back To Top
No. of Recommendations: 3
The tax bracket is based on taxable income, not adjusted gross income. So, it's after the standard (or itemized deduction).

Ira
Print the post Back To Top
No. of Recommendations: 0
Thanks for the reply Ira!

So, using my example above, I would remain in the 0% tax bracket. Understood.
Here is a follow-up question:
Let’s say my Adjusted Gross Income is $104,801, and this is my only income. After the standard deduction, it leaves me with a total taxable amount of $80,001. Here’s my main uncertainty….
Am I taxed on the entire $80,001? OR, is $80,000 of it tax-free, and the remaining $1 my taxable income?

Again, thanks for any help. This will be so helpful in future tax planning!
Print the post Back To Top
No. of Recommendations: 7
Let’s say my Adjusted Gross Income is $104,801, and this is my only income. After the standard deduction, it leaves me with a total taxable amount of $80,001. Here’s my main uncertainty….
Am I taxed on the entire $80,001? OR, is $80,000 of it tax-free, and the remaining $1 my taxable income?


The correct way to think about this is that all of your $80,001 is taxed, but some of it is taxed at 0%. First your ordinary income (non capital gains or qualified dividends) is taxed at the raegular rates (10%, 12%, 22%), then any remaining capital gain or qualified dividend income up to a total of %80,000 is taxed at 0%. Any excess over $80,000 (up to $441,450) is taxed at 15%, and so forth as you move up the tax brackets.

In your example, if all of the income were capital gains or qualified dividends, the first $80,000 would be taxed at 0% and the last dollar at 15%.

Ira
Print the post Back To Top
No. of Recommendations: 0
Thanks much Ira! Very helpful!
Print the post Back To Top
No. of Recommendations: 1
I just checked the numbers for 2021 (at https://www.ameripriseadvisors.com/assets/calculators/Tax104...) and they are a bit better.
You would need to have $105,900 in LTCG to start paying taxes.
Print the post Back To Top
No. of Recommendations: 8
You would need to have $105,900 in LTCG to start paying taxes.

Here, let me phrase that a little differently:

For MFJ using the standard deduction, you would have to have $105,900 in total income before LTCG and qualified dividends would start being taxed.

Note: If you have more than $25,100 in ordinary income, you will pay taxes on that ordinary income. Also, the numbers will vary for those with other filing statuses and/or using a deduction other than the standard deduction.

AJ
Print the post Back To Top
No. of Recommendations: 1
Yes, taxes are so complicated. Also the next dollar may push your LTCG into 15% territory or it may fall into regular income. Also remember that after you count any LTCG amounts in special brackets, you have to skip those amounts to determine your initial (first dollar) tax bracket for regular income.

I like the online calculator because you can type in your hypothesis and get a tax estimate rather quickly.

Cheers,
Juan@Austin
Print the post Back To Top