>>>there is no capital gains due on adjusted incomes under $65,100 for couples and $32,550 for singles<<<
Help me out here. Investing is my expertise, not taxes. A prelude:
I manage my elderly aunt's account. I have been short housing and long oil. We made a killing last year as you can imagine. She got a nasty-gram from the IRS. Didn't list or pay taxes on Social Security income!!! I was stunned. In the past, her income was so low that I didn't even have to declare her SS income. Turns out I did so well for her in the capital markets that she got taxed on her SS. A team of firemen had to come to the house to scrape me off the ceiling when I found out.
My questions:
1) Capital gains are included in Adjusted Gross Income, correct??
2) If so, are they included as pre cap gains tax or post cap gains?
3) Relatedly, where does the separate cap gains rate come into play?
4) Is the special extra-long-term (5 years) cap gains rate still around??? As I recall it was 5% if you hold for five years.
5) For this once in a lifetime, no tax on LT cap gains if you make under $65K (or whatever) do your actual cap gains count as part of the $65K income?? (Stupid question but I need to be sure.) Is it after tax cap gains or pre tax cap gains that count as income. For example, if you made $200K day trading and had the 33% (?) rate apply, your post tax income would be $66K, so all of your LT cap gains would be taxable. If the cap gains are counted as income directly, then you would be wise not to make more than $66K day trading if you wanted to cash in on the special LT freebie. (Taking a profit is NEVER bad. In this special circumstance, one would want to do heavy tax loss harvesting in December.)
6) Are any of you very knowledgeable colleagues able to plan or execute your taxes w/o repeated/iterative simulations through TurboTax??? I sure can't.
Tax tip: I have said this often before, but if you hedged a position by selling options against it, and the options have gone deep ITM, you can very legally buy them back for a loss to offset other gains. I have done this many, many times. Typically I will buy back the options which are ITM or losses for me,and sell the same options but for January of the new year. Typically I get a credit for this. Sometimes the stock drops back down so I can buy the Jan options back for a profit. Tha profit is of course taxable. I just did this with very ITM CNQ covering calls when rude collapsed. |
