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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I have income from a form-1099 for about $55k and capital gains

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I have income from a form-1099 for about $55k and capital gains income worth about 300K. I don't have any other income. How must I calculate the approx. tax amount I will owe, both federal and state (DE)? Thanks.

Megan C :

Thanks for requesting me. How are you today?

Megan C :

To calculate your tax, I need to know your filing status - married or single

Customer:

single

Megan C :

Okay let me do some calculations for you

Customer:

thanks...

Megan C :

You're welcome

Megan C :

The capital gains are long term, right?

Customer:

yes, more than a year

Megan C :

Okay great

Megan C :

For federal, I calculate your total tax to be $65,190

Megan C :

I used the TurboTax Taxcaster, available HERE

Megan C :

Let me check on the state now.

Customer:

I would appreciate it if you can take me through the calculation process for federal..

Megan C :

I used the calculator. It would be extremely complex because you hit the alternative minimum tax

Megan C :

and I'm not good at doing those by hand.

Megan C :

Your effective tax rate is about 18% which you would expect because the bulk of your income is taxed at 15%

Customer:

which income tax bracket would i fall under..?

Megan C :

Your marginal rate is 33%

Customer:

I guess the 1099 is confusing matters for me....because a 1099 income means no tax has been withheld as it is from a consulting gig so what would be my actual income tax, if I removed the capital gains from the picture for a second?

Megan C :

You can't remove the capital gains. That changes your tax bracket.

Megan C :

Wait...I missed that..your tax will be a little bit more because you have self employment tax and I didn't put this in the right line

Megan C :

Add 7,771 to my figure for self employment taxes

Customer:

okay...so are you able to give me the percentage split of taxes for my income from self-employment and my capital gains...?

Megan C :

You figure you pay 15% on $300,000, about 15% on your self employment just for self employment taxes, and then the rest is tax on your regular business and AMT

Customer:

okay okay

Megan C :

Delaware is $23,256.48

Megan C :

Do you own your own home, or have medical bills? We could bring this down some

Customer:

if my self-employment income were to be reduced to <$36,250, does that mean I will have to pay 0% capital gains?

Megan C :

No, that would not be the case. Your capital gains income is factored in when you calculate your marginal rate

Customer:

I am working on a contract job, so potentially could suspend the work temporarily which would take me down to a lower income bracket

Megan C :

so although it's taxed on 15%, the $300,000 still counts to get you to that 33% tax bracket

Customer:

ok...no, i dont own my home or have medical bills..

Customer:

i was hoping since I did not have an employer and was working contractually, I could push myself into a lower income bracket to avoid the heavy capital gains tax...but I guess that may not be possible.

Megan C :

No, it's not possible, unfortunately, given the level of your capital gains

Megan C :

It's sort of strange that they add that income when figuring your tax bracket, but then don't tax you that marginal rate

Megan C :

Your DE tax is $23,256 by the way

Customer:

yes

Megan C :

I'm sorry that I couldn't help in that respect

Customer:

okay sure, thanks...are there any steps I can take before Dec 31, 2013 to reduce the capital gains?

Customer:

no worries, I appreciate your help

Customer:

capital gains tax, I mean

Megan C :

Well, you could invest in your business. If you drove your income negative that could help out

Megan C :

but you will spend more money doing that than you will save in taxes

Megan C :

Is there anything else that I could assist you with today?

Customer:

that woudl be all

Customer:

thank you

Megan C :

You're welcome. Before you go, please rate me positive using the rating feature along the bottom of your screen

Customer:

okay, thanks

Megan C :

This gives me credit for assisting you today. 3-5 stars/smileys is positive

Megan C :

You're welcome :-) You have a great day

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