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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 542
Experience:  Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
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Hello,I am facing a pretty hefty capital gains tax in NC

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Hello,

I am facing a pretty hefty capital gains tax in NC ($1500). I originally sold some stocks because I was in graduate school and made very little income ($3000). Are there any tax shelters for capital gains in NC for people with a low income or who have high educational expenses that year ($30,000K)?

Thank you,

Ben

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

How are you today?

Customer:

I'm doing well, how are you?

MyVirtualCPA :

The way to avoid capital gains tax is to have capital losses to offset the capital gains

Customer:

so, a stock that I bought that lost money, and which I subsequently sold?

MyVirtualCPA :

Yes - if you lost money, you could deduct that against stocks you gained money

Customer:

yes, I don't have anything like that

Customer:

i'm wondering if NC has any rules for using capital gains to pay for educational expenses

MyVirtualCPA :

There are educational tax breaks you can take on your return in NC, such as the tuition deduction

MyVirtualCPA :

But, there's no rule that allows you to avoid capital gains tax if you pay for educational expenses

Customer:

is there a way to defer capital gains over multiple years?

MyVirtualCPA :

No, there's no way to spread it out - you would do that by spreading out the sale of your assets

MyVirtualCPA :

for example if you wanted to sell your stock and it was december, you could sell half in december and the other half in january and spread the gain over the two years

Customer:

and, there is no consideration for income? my gross income was less than 10k last year, not counting the capital gains

MyVirtualCPA :

For your federal taxes, you would not owe capital gains tax provided that you held the stock longer than 1 year since you are in a lower tax bracket

Customer:

yes, i know that.

Customer:

do you have any suggestions for me?

MyVirtualCPA :

I'm just double checking that there is no similar exemption in North Carolina

MyVirtualCPA :

In North Carolina there's no distinction between regular income and capital gains - they are taxed the same

Customer:

that is unfortunate... well, thank you for your help

MyVirtualCPA :

But you can take the educational deduction

MyVirtualCPA :

So you can deduct $4,000 from your income

MyVirtualCPA :

that will lower the tax a bit

Customer:

yes a bit :)

MyVirtualCPA :

I'm sorry I didn't have better news. Is there anything else you need?

MyVirtualCPA :

If not, please rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

nope that's it. thanks for the help

MyVirtualCPA :

You're welcome. Please don't forget to rate, as that's how I receive credit for assisting you today

Customer:

Well, unfortunately you didn't tell me anything that I didn't already know... so, thank you for trying but this was ultimately not helpful...

MyVirtualCPA :

I told you about the North Carolina tax deduction for education, which will lower the tax

MyVirtualCPA :

Have I provided you with excellent service?

Customer:

No, sorry...

Customer:

thank you for trying though

MyVirtualCPA :

Have I provided you with okay service?

Customer:

Yes but not worth $45 unfortunately

MyVirtualCPA :

Okay will you rate my service as Okay that will give me credit for assisting you today

Customer:

I can give you credit but I don't feel it is worth $45. I'm happy to pay a smaller amount for your time. How can I do this?

MyVirtualCPA :

How much would you be willing to pay?

Customer:

$15

MyVirtualCPA :

You can rate my answer, then contact customer service and ask them to refund $30

Customer:

my ride is leaving, I need to go now. i'll resolve this when I get hom

MyVirtualCPA :

Okay thanks

MyVirtualCPA :

Could you please rate though before you leave?

Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!

 

I am trying to figure out how your tax liability is $1,500 with your income. For NC taxable income under $12,750, the tax rate is only 6%. So if your income is $10k (you said above it was less than $10k, excluding the capital gain), plus you made $3k on the stock sale, your income is under $13k. Assuming that you are single with no dependents, and only claim your own exemption, you would get a $3k exemption for yourself, plus a deduction for $4k for your education expenses. That gives you taxable income of about $6k. At 6%, your tax bill should only be $360! No where near $1500! To double check, I penciled out a NC-40, and got the same result.

 

Double check your numbers, something is wrong. If you want, you can give me the line-by-line amounts, and I will double check the tax with my tax program.

 

I look forward to your reply!

 

Roger

taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 542
Experience: Licensed CPA, MA, MST with 31 years' experience. Teach Accounting and Tax courses at Masters level.
taxmanrog and other Tax Specialists are ready to help you

I was just following up. Did you look at the NC tax? It should not be $1500, given the fact pattern you laid out. I would love to try to see where your numbers are. If you could list the line numbers and the amounts on your NC-40, I will see where the problem is.

 

Thanks! I look forward to your reply!

 

Roger

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