TheyReadALot OP t1_j2f5p14 wrote
Reply to comment by pancak3d in Does Capital Gains Tax apply to all gains, or only those over the income threshold for that rate? by TheyReadALot
Thanks so much!
To clarify, is it the case that when calculating your total taxable income for capital gains tax rate calculations, you should do so *after* removing the standard deduction from your income?
To continue the example, if my income was $40,000 and the standard deduction is $12,950, I wouldn't actually pay any capital gains taxes until I earned >$14,626 in capital gains (which would make my income $54,626 - minus the deduction of 12,950 =$41,676 the capital gains income threshold).
Thank you again for your help!
pancak3d t1_j2f6603 wrote
Correct. The standard deduction reduces your taxable income.
TheyReadALot OP t1_j2f6y6d wrote
Woo hoo! This makes things much less stressful as I'm trying to figure out our tax situation and adds SO much clarity. Thanks so much for your help.
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