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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12049
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have a business that I may sell for $950,000. Almost most

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I have a business that I may sell for $950,000. Almost most all of this will be capital gains.

My income is very low (about $25,000/ year). How do I figure out my capital gains? Or Can you tell me what my tax rate on the capital gains may be? Do you need much more information?

Lane :

Hi,

Customer:

Hi

Lane :

You'll be at the top capital gains rate of 20%

Lane :

Capital gains are based on income tax rate but the gain amount is use to calculate that

Lane :

Then thanks to our president, we have the new 3.8% Medicare tax that is applied as well to this in that capital gains tax bracket

Lane :

so worst case, you're looking at 23.8%

Customer:

If my income tax rate is near zero, does that make a difference?

Lane :

So sorry, but the capital gain amount itself is used

Lane :

Hang on and I can get you some docuentation if you like

Customer:

Okay, I heard that there was a tiered rate.

Lane :

Their is for income taxes... see this ... AND let me check the regs for application

Lane : <table border="0">


Other capital assets
ordinary tax rates
0%, 15%, or 20%
3.8%


10%
0%


15%
0%


25%
15%


28%
15%


33%
15%
3.8%


35%
15%
3.8%


39.6%
20%
3.8%


Lane :

Here's an excellent, more readable, overview ... now, let me get you the IRS regs themselves :http://taxes.about.com/od/capitalgains/a/CapitalGainsTax_2.htm

Customer:

Okay, so my hopes that I was below the 15% income tax would mean that my capital gains would be zero, is not possible.

Lane :

No no,,, so sorry, but the gain itself is used as the income in the calculation

Lane :

Here's an article that deals with this aspect .. botXXXXX XXXXXne is that once you go through the calculation you'll see that it INCLUDES the GAINS as INCOME but forces out any ORDINARY income taxation but the capital gains rate is applied to all of the capital gains income

Customer:

Thank you for your help & have a good day.

Lane :

]you'e very welcome

Lane :

If this has helped, I would appreciate a feedback rating of 3 (OK) or better (excellent, is ideal)… That's the only I get credit for the work.


However, if you need more on this, please come back here, so you won't be charged for another question.

Customer:

This was excellent!

Lane :

Thank you so much!

Customer:

DF

Customer:

ES

Customer:

Is there any truth to this article?

Customer:

Sorry

Customer:

Didnt mean to send that many times

Lane :

sOK, Just a sec...let me look at it ... I think it only applies to those in the lower tax brackets where the rate becomes zero ... What you have to remember is that you tax bracket is calculated on taxable income ... and capital gains income IS taxable income ... you're is a very atypical case, where the gain is so high ... but again, let me look

Lane :

Yes, they don; really cover your situation ... note that the two main headings are cashing in on "lower capital gains taxes" and "Limited to lower incomes"

Lane :

You do may a much lower RATE (becase it's the 20% rather than the 39.6%) BUt capital gains IS a part of taxable income, to figure your bracket

Lane :

Note the second sentence, " Capital gains are generally included in taxable income but are often taxed at a lower rate." in this article: http://www.taxpolicycenter.org/briefing-book/key-elements/capital-gains/how-taxed.cfm

Customer:

Thanks again. I think that is it for now.

Lane :

YW

Lane and other Tax Specialists are ready to help you


Thanks much Dirk,

I'll look up the actual IRC citation for you too.

... just check back here.

Lane