Capital Gains and Losses

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If my w2 shows 115000.00 but my business shows a 100000.00…

Customer Question
If my w2 shows...

If my w2 shows 115000.00 but my business shows a 100000.00 loss will i have to pay any capital gains tax

Accountant's Assistant: I love the idea of making big money with investments, but there are so many things that could go wrong. The Accountant will be able to help you. Please tell me more, so we can help you best.

I w2 myself but this year my business lost almost as much as i was paid. I sold my business in june the price paid for long term capital gsins wss 750000.00 and 58000.00 for other assets.

Accountant's Assistant: Is there anything else important you think the Accountant should know?

My question is, do i have to pay any capital gains tax because I after the loss would onlh have made 5000.00

Submitted: 8 months ago.Category: Capital Gains and Losses
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11/17/2017
Tax Expert: Lane, JD, CFP, MBA, CRPS replied 8 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Capital Gains and Losses
Satisfied Customers: 14,648
Experience: Have been providing Financial and Tax advice for 30 years.Concentration in Corporations, Estate, Income Tax and Business Planning
Verified

Hi. My Name' Lane -

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice on three continents since 1986.

Bear with me just a moment and I’ll provide my initial response and then we can go from there if you have further questions on this

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Tax Expert: Lane, JD, CFP, MBA, CRPS replied 8 months ago

Please don't shoot the messenger here but the capital gain must be netted against CAPITAL losses and can then only be used to offset other income $3000 er years and the carried over to following years.

...

So this will increase your ordinary loss, but the taxation of the long term capital gain is a separate component, and that will reduce any OTHER ordinary income on the return (say if you file jointly and your wife has income, or if you have rental or interest income ... all ordinary income)

...

But the tax on the gain will flow to the return as a positive additional tax amount

...

Long-term gains and qualified dividends taxed at

  • 0% if taxable income falls in the 10% or 15% marginal tax brackets
  • 15% if taxable income falls in the 25%, 28%, 33%, or 35% marginal tax brackets
  • 20% if taxable income falls in the 39.6% marginal tax bracket
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Customer reply replied 8 months ago
Will my taxable income be after the business loss this year if so would that be zero tax on income therefore making the long term capital gains zero
Tax Expert: Lane, JD, CFP, MBA, CRPS replied 8 months ago

So sorry ... I didn't see hat you had come back.

...

No, sorry, it doesn't work that way. The ordinary loss WILL wipe out any ordinary income.

...

But Capital gains ARE also a part of taxable income.... SO the capital gain itself will push you into those higher brackets...bear with me one more sec and I'll attach a graphic that illustrates this well

Ask Your Own Capital Gains and Losses Question
Tax Expert: Lane, JD, CFP, MBA, CRPS replied 8 months ago

So as you can see, the gain itself will be taxed at 15% until your total taxable income (which includes the gain) reaches over 400,000.

...

But yes, this is one of the bigger IRS "gotcha's," the requirement that capital gains can only be used (other than that little 3000/yr allowance) against capital losses.

Ask Your Own Capital Gains and Losses Question
Tax Expert: Lane, JD, CFP, MBA, CRPS replied 8 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

I hope that you’ll rate me based on my accuracy and thoroughness, rather than any good news/bad news content.

That’s the only way JustAnswer.com will credit me for the work here.

Thanks,

Lane

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