Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Cap. Gain Tax Worksheets

Posted by taxguru on February 21, 2009

From a reader:

Subject: Capital Gains Rates

In the Tax Guru-Ker$tetter Letter of 02/15/09 titled “When you may want to show capital gains…” you write “Special Zero Percent Capital Gains Tax – For 2008, 2009 and 2010 sales by individuals, all or part of any long term capital gain is subject to a Federal tax rate of zero percent. “

Another factor which determines the tax rate on LTCG are the amount of qualified dividends. The “Qualified Dividends and Capital Gain Tax Worksheet-Line 44” on page 38 of i1040.pdf [2008] calculates how Capital Gains plus qualified dividends are taxed above and below the 0% rate level. I just copy that worksheet into an Excel spreadsheet, add formulas, & enter the appropriate numbers.

My Reply:

That is an excellent point to make. Many of us forget the fact that the special zero percent tax rate has to be shared between long term capital gains and qualified dividends.

I will be posting a pdf copy of the IRS worksheet you referred to, plus a similar one from The TaxBook.

Thanks for writing.

Kerry

Reader Followup:

Note for those individuals who will soon be doing their 2009 Estimated Tax [f1040es], your 2008IRSCapGainWS.pdf will work fine for 2009* by changing Line 8 using your “2009 Individual Income Taxes Federal – Form 1040” at http://taxguru.org/incometax/Rates/1040-09.htm as follows:

Line 8
Single 2009=$33,950 [2008=$32,550]
MFJ/Qualifying Widower 2009=$67,900 [2008=$65,100]
HeadHousehold 2009=$45,500 [2008=$43,650]

*The above assumes that the tax rates for CapGains/QualDivds are not repealed.

My Reply:

Excellent suggestions.

Thanks for your input.

Kerry



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