David,
But the US rates for CGT are all different to the income tax rates. Is the amount of capital gains added on to compute the marginal income tax rate or not? The two aren't actually taxed as one lump as here.
No one ever understood how it actually worked, and that was before they changed the rules to further complicate them.
Use the following SIMPLIFIED model :
Depending on what your tax filing status is, (Single, HOH, Married, MFS), every adjusted dollar of gross income starting from zero is taxed at a particular rate until a particular tax rate bracket is filled. ( typically the bracket rates are/were 0%, 15%, 28%, and either two or three brackets ending at 39.6%, not precise ). Short term capital gains, held for less than one year, fall directly here. Long term gains are also entered here, but an alternate calculation is done to place a limit on the LTCG rate. If there are net CG losses, only $3000 can be used to offset ordinary income in a given year, but the remainder of the losses can be carried over year to year. After all this is done, too many deductions subject you to an alternate minimum tax (AMT) calculation.
If you haven't paid enough taxes (withholding and estimated tax payments) during the year on a quarterly basis you will be subject to an interest penalty. I find it easier to pay the penalty as opposed to doing a tax return 4 times a year without a released SW package for the first three quarters.
Good Luck, Don |
