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Capital gains taxes

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Brownsfan2k5
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Capital gains taxes  Reply with quote  

Ok so this might be a dumb question but I would like some clarity on the answer.

I see that the IRS is stating:
You pay 0% if you fall into the 10% or 15% tax bracket. This includes singles filers with incomes below $36,250 for capital gains taxes.

So if I let my investments grow another 20 years and I choose to cash in my investments while being deployed to a tax free zone, do pay taxes on those gains? Or does the IRS only include my working income (which will fall in the 15% tax bracket) as income and I will be exempt from any taxes on my gains?

Thanks in advance
Post Sun Sep 01, 2013 5:36 pm
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Wino
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This is s a tough one to track down, but it does seem to come from your actual tax bracket. How you arrive at that tax bracket does not appear to matter to the formula. Remember, any gains on the investment sale - you get to subtract your basis - is going to add to your taxable income, even if you're in a tax free situation.

So, it looks like if you can stay below about $70K taxable (married, filing jointly), including the capital gains, you get to pay zero percent.

Of course, finding the irs.gov link is nearly impossible. I'm sure it is there, somewhere, but all I can find is a statement that if you're in the 10 or 15% brackets, you'll pay zero percent capital gains. I could find no link to the actual publication or rule.
Post Mon Sep 02, 2013 2:10 am
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coaster
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The amount of income attributable to long-term capital gains is taxed at the capital gain rate. The long-term capital gains rates are: 0% if the marginal tax rate on the ordinary income is 10% or 15%; it's 15% if the marginal tax rate on ordinary income is 25% to 35%; and it's 20% if the marginal tax rate on the ordinary income is over 35%.

from: http://taxes.about.com/od/capitalgains/a/CapitalGainsTax.htm

Personally, it's all moot anyway since the chances that taxes that far off in the future are going to be the same are about zero. Laughing

~Tim~
Post Mon Sep 02, 2013 3:15 am
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Wino
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I didn't even see the 20 year window part of the question.
Post Mon Sep 02, 2013 3:19 am
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JohnsonJohn
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Capital gains taxes are to be deducted anyhow and these are the taxes that are to be deducted after some gain and their ratio is fixed.
Post Mon Sep 02, 2013 4:47 pm
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clydewolf
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Re: Capital gains taxes  Reply with quote  

quote:
Originally posted by Brownsfan2k5
Ok so this might be a dumb question but I would like some clarity on the answer.

I see that the IRS is stating:
You pay 0% if you fall into the 10% or 15% tax bracket. This includes singles filers with incomes below $36,250 for capital gains taxes.

So if I let my investments grow another 20 years and I choose to cash in my investments while being deployed to a tax free zone, do pay taxes on those gains? Or does the IRS only include my working income (which will fall in the 15% tax bracket) as income and I will be exempt from any taxes on my gains?

Thanks in advance

I am not quite sure I understand your question, so I am going to rephrase your post and question:
You have Foreign Earned Income (FEI), and want to exempt that income from US income tax. When you do the exemption of the FEI will your long term capital gains be taxed at a rate higher than zero?

Your FEI is reported on your W-2 and on your 1040 line 7. Following that is all of your other income.
The qualified FEI exemption amount is determined on form 2555, and shows on line 45 of that form.
This is reported on your 1040 line 21 (other income) as a negative number. That removes your qualified FEI from your gross income and subsequently from your AGI and taxable income.

Then you move to the Qualified Dividends and Capital Gain Tax Worksheet.
Line 1 reports your taxable income (1040 line 43), However if you are filing form 2555 (FEI) you enter the amount from the FEI Tax Worksheet, line 3. This line (3) is the sum of your taxable income (1040 line 43) and the FEI exclusion plus the housing exclusion.

So the FEI and any Housing Exclusion is considered when determining the tax on your Qualified Dividends and Long Term Capital Gains.
Post Tue Sep 03, 2013 1:47 am
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coaster
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Do you happen to know if Turbo Tax handles FEI?

~Tim~
Post Tue Sep 03, 2013 5:18 am
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Brownsfan2k5
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Sorry for confusion, but I am in the military so I was referring to being deployed overseas in a tax free zone(war zone)
Post Tue Sep 03, 2013 8:30 am
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clydewolf
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quote:
Originally posted by Brownsfan2k5
Sorry for confusion, but I am in the military so I was referring to being deployed overseas in a tax free zone(war zone)

Thanks for your service to our country.

That is different. The pay you receive while serving in a combat zone should not be included in your W-2 box 1 wages. Therefore it would not be reported on your 1040 or any other tax form. And would not be used to determine the tax rate for your Long Term capital gains.
Post Tue Sep 03, 2013 2:08 pm
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clydewolf
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quote:
Originally posted by coaster
Do you happen to know if Turbo Tax handles FEI?

I am not familiar with Turbo Tax. My guess is that TT would handle FEI.
Post Tue Sep 03, 2013 2:10 pm
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Wino
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I don't remember what I used last year, but I had to file for FEI, and it was included. I don't doubt that Turbo Tax covers it. It is a fairly common form.
Post Tue Sep 03, 2013 4:31 pm
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LondonTax1
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how to avoid capital gains tax  Reply with quote  

Although gifting assets is generally treated as a disposal for CGT, exactly as though it was a sale at market value, with spouses, gifts are made at cost. Hence in such a transfer, contrasting with general gifts, there is no gain or loss.
Link removed
Post Tue Sep 03, 2013 4:38 pm
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Androidgamed
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Capital Gains Tax is a tax on gains made when you sell assets - things like shares, a holiday home or an oil painting. If you buy an asset or investment then later dispose of it for more than you paid for it, you are said to have made a capital gain.
Post Tue Oct 08, 2013 7:34 am
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