Can Capital Gains Push Me Into a Higher Tax Bracket? 

As of 2008 the tax code was over 70,000 pages. It could easily be over 90,000 pages by now. Any honest accountant will tell you they've never read all the tax laws.

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@@RootFP So I only have and use Uphold and I traded crypto back and forth within Uphold. I only cashed out $700 for the entire year, all the rest i just traded one Crypto for Another but did not cash it out. I dont understand why my Capital Gains says $626,500 and total Income is only $85.00 When I only cashed out $700 in 2023. How are gains that high!? How do I have to pay taxes on $626,500 when I only actually made $85 and cashed out $700. Help.... Im confused

Thank you

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I'm glad this video was helpful! The difference between ordinary income and capital gains taxation can get real confusing.

@@RootFP Glad to know you’re in California. Will call you when we’re ready

I agree, it would help to see an example using the actual forms. Maybe some of these comments will be helpful. On Schedule D, you combine all short term gains and (losses) and also combine all long-term gains and (losses). This is done because losses can always be used to offset gains. Then you end up with a short term total g/(l) and a long-term total g/(l). Then short term total and long term total get added. If the result is positive, the entire amount flows through to 1040, line 7 and gets counted as you noted as part of AGI. If part of the gain is short term, it gets treated as ordinary income. If part of the gain is long term, it will get the capital gains tax rate. If the result is negative, then only up to 3,000 of losses for single filers flows through to 1040, line 7 to offset other income. Any losses remaining get carried over to the next year. Let's say you have $10,000 of short term gains and $5,000 of long-term losses. Then $5,000 of net short term gains flows through to 1040 and gets taxed as ordinary income. If you have $5,000 of short term losses and $10,000 of long term gains....then $5,000 flows through to 1040 and will get taxed at capital gains rate. If you have $5,000 of short term gains and $10,000 of long term gains, then $15,000 flows through to 1040, line 7 and the $5,000 short term gets taxed as ordinary income and $10,000 gets taxed at capital gains rate. If you have both short term and long term losses, then the Capital Loss Carryover Worksheet is used to track both short and long term loss carryovers. These get tracked separately and will be entered on separate lines on Schedule D for the following tax year.

Roth conversions are considered ordinary income that will raise your taxable income. Maybe consider converting it over in small portions.

Yes it’s important to consider ordinary income and capital gains when looking at rebalance options

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I think what you are asking about is addressed at about the 4:40 mark. in figuring your long term capital gains rate, you first consider ordinary income (minus deductions), and then you stack your ltcg on top, and that total will decide the rate you pay.

Not so sure thats it....

Lol...$100,000 taxed @ 0? IRS says in your dreams. You're second scenario is correct.

Thank you! And yes, that is correct

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yes, since 85k income would put you above the 0% bracket, you would have zero of your capital gains taxed at 0%, they would all be taxed at the higher bracket levels.

Only if you're married, filing jointly.

Not exactly. In his $100K LTCG and $74K EI example the amount between $83,350 limit and the $74,000 earned income is taxed at 0, the balance is taxed at 15%.

​@@sw6118thank you now I get it

Then scenario 1) $1 will be not taxed (0%), and the remainder is taxed at 15%. Scenario 2) All $100,000 taxed at 15%

I think you got confused. He's implying that capital gains will not impact your income bracket for Roth conversion, they''re handled separately. Yes, you'll definitely be pushed to a higher tax bracket just like earned income if you decide to convert $200,000 to Roth in a single year. However, what he's saying is that for example, that same year you also sold another $100,000 worth of stocks, then that's handled differently and will have zero impact on increasing taxes on your initial ROTH conversion. Your ROTH conversion will be taxed just as it is, like ordinary income, while the capital gains will be taxed using a separate tax table, in this case, 15%.

Yes, assuming you're filing jointly and not single

That's what I was under the impression with.

Yes. I work with a family office and one thing we specialize in is taxes. Long story short is your income rate determines your cap gains rate so if you make global income 0 then cap gains is also 0

Yes

This is from the IRS website: Adjusted gross income, also known as (AGI), is defined as total income minus deductions, or "adjustments" to income that you are eligible to take. Gross income includes wages, dividends, capital gains, business and retirement income as well as all other forms income. Examples of income include tips, rents, interest, stock dividends, etc. Adjustments to income are deductions that reduce total income to arrive at AGI. Examples of adjustments include half of the self-employment taxes you pay; self-employed health insurance premiums; contributions to certain retirement accounts (such as a traditional IRA); student loan interest paid; educator expenses, etc. You can find your previous AGI on your 2022 federal tax return to use as a guide. Please refer to Line 11 if you filed a Form 1040. Your AGI is calculated before you take your standard or itemized deduction on Form 1040.

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You pay 0% only on the first 7k ($47,025 - $40,000), then you pay 15% on the remaining 43k.

Absolutely correct, assuming you're single

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You would just take your agi and subtract the capital gains amount from it. then subtract your standard or itemized deduction from that number, and that's the number you would use to determine your LTCG rate.

You need to take your taxable income and use the Qualified Dividends and Capital Gain Tax Worksheet For Line 16 which you can find in the 1040 instructions to figure out the amount you will actually owe. Do not use the Tax and Earned Income Credit Tables if you have capital gains or qualified dividends.

Example sake!

Look again at 4:25. He did not label $74K as AGI; he labeled it as “Taxable.”

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