Tax question

gsilver

gsilver

Star
Sep 6, 2000
29,727
10,254
Just looking at a hypothetical:

Long-term capital gains with ordinary income under 40k is 0%, right?
One could have millions of dollars in long-term capital gains, but donate enough of what they had in salary to bring them under that threshold and pay nothing, right?

This is how CEOs manage to pay less in taxes than their janitors, right?
 
PoorPigg

PoorPigg

Curly-tailed
May 26, 2012
12,468
5,604
West Coast, US
Topic No. 409 Capital Gains and Losses https://www.irs.gov/taxtopics/tc409

For now, you may be correct. Long-term CGs receive different consideration to reduce turmoil in market at certain income levels. Refer to the able in the link. Other factors may impact your personal status. Consider using a fee-for-service professional to help you with your situation.
 
sdevito

sdevito

Super Star
★
Nov 19, 2000
50,937
14,146
gsilver said:
Just looking at a hypothetical:

Long-term capital gains with ordinary income under 40k is 0%, right?
One could have millions of dollars in long-term capital gains, but donate enough of what they had in salary to bring them under that threshold and pay nothing, right?

This is how CEOs manage to pay less in taxes than their janitors, right?
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A little yes but mostly no. CEO's pay lower percentage than janitors, not gross amount.

A lot of that IS due to their income being in the market which does a few things.
1) Elon Musk "made" like $100 billion last year, but that isn't actual income. His net worth just increased. He isn't taxed on that amount at all.
2) The money they do cash in/make is usually taxed at the long term capital gains rate which is far lower than the actual tax rates. In your example only the first 40K of long term capital gains is taxed at 0% (ordinary income is taxes at different rates). After 40K it is taxed at 15% until about 1/2 a million and then I think it maxes out at 20% after that. All WELL lower than the ordinary income rates.

BUT, they don't have to donate anything to fall into those rates. Those are just standard for everyone.
 
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SageLeaf

SageLeaf

Almost Not a Noob
Nov 15, 2023
613
608
-Troopa- said:
Here's an interesting case study titled $150,000 INCOME, $150 INCOME TAX.

https://rootofgood.com/make-six-figure-income-pay-no-tax/

I know the author, btw. Have video chatted with him a bit. He helped look over my investment plan years ago.
Click to expand...

Appreciate the thought but that’s 150k for two people combined, with kids. He admits without kids his taxes would be closer to 4% or $6000. And we file separately soo end up paying some heavier taxes than that. I do try stuff like tax loss harvesting and business expenses however it doesn’t take the edge off much
 
-Troopa-

-Troopa-

No Longer a Noob
Jul 7, 2019
8,085
9,101
Yeah, he has a specific situation that enables him to pull that off. It's not something everyone can do, but I thought it was a cool case study.

I have a CPA for my business and personal tax returns. They do a variety of tax saving techniques. I still end up paying around 17% effective tax rates. Some years ago it was 14% but income has gone up, which is a good thing!
 
m00m00m00

m00m00m00

ಠ_ಠ
Jun 14, 2001
82,536
14,203
I saw a lot of the business write-offs in the business version of TurboTax, seems like you really can save more if you can justify itemizing

Wasn't the case for me but honestly the easiest way to exceed the standard deduction is thru sales and county property taxes, which has a 10k cap, and medical/dental exceeding 7.5 of your agi


If you have a businessand itemize then you can do stuff like meals, cell phone, cell phone plan, gasoline, etc.

You're only allowed to deduct business mileage if you take the standard deduction. It's very generous. 65.5 cents a mile. I use the stride app to keep an electronic log
 
DevilDancer

DevilDancer

Not the boss
Sep 27, 2001
49,456
22,621
North America
We used to itemize for the mortgage interest deduction, but after the Trump tax changes it hasn't been worth it.

Also, this will be the first time I file with my wife. I've always filed separately so her income didn't get counted for my student loan payment calculation but Biden changed the rules and my loans are supposed to go away later this year anyway.

I hope people realize how borrower-friendly Biden has made the student loan system. The new payment plan is really generous.
 
PoorPigg

PoorPigg

Curly-tailed
May 26, 2012
12,468
5,604
West Coast, US
DevilDancer said:
We used to itemize for the mortgage interest deduction, but after the Trump tax changes it hasn't been worth it.

Also, this will be the first time I file with my wife. I've always filed separately so her income didn't get counted for my student loan payment calculation but Biden changed the rules and my loans are supposed to go away later this year anyway.

I hope people realize how borrower-friendly Biden has made the student loan system. The new payment plan is really generous.
Click to expand...
I hope people realize how payer-unfriendly Biden has made the student load system. The new payment plan steals from those individuals actually covering the bill in addition to paying their own tuition.
 
PoorPigg

PoorPigg

Curly-tailed
May 26, 2012
12,468
5,604
West Coast, US
-Troopa- said:
I’d be happy for my taxes to help someone like your granddaughter. Let’s get rid of a senator or two to pay for it. Or twenty. I’ll pick.
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TY, but she would snap back that she requires no help,no help whatsoever. Then she would ask how she could help you. She has that mean dog style.
 
PoorPigg

PoorPigg

Curly-tailed
May 26, 2012
12,468
5,604
West Coast, US
"In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes." Source

1711028609378.png
rs
 
PoorPigg

PoorPigg

Curly-tailed
May 26, 2012
12,468
5,604
West Coast, US
Biden-Harris tax revenue proposal (2025) PDF
"Together, the proposals would increase the top marginal rate on long-term capitalgains and qualified dividends to 44.6 percent."

"Under the Biden proposal, the combined federal-state capital gains tax exceeds 50% in many states. California will face a combined federal-state rate of 59%, New Jersey 55.3%, Oregon at 54.5%, Minnesota at 54.4%, and New York state at 53.4%." Source

1713968457793.png
 
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