Hi, again. I’ve sought answers here before and you all have been wonderful. I am utterly confused!
I am in NC where long term (CG) capital gains would be taxed as general income at a flat 5.25% rate.
Federally, I’m lost. We are married, filing jointly. Our income is well below the O% capital gains tax rate on (LT) long-term shares (for 2023, 0% up to a combined income of $89,250.)
I understand LT CG “cannot push you into a higher tax bracket.” I understand LT CG are taxes (if at all) separate from income, and are addressed on the 1040 schedule D.
Yet, when I look to validate this, I’m finding conflicting info. When I try the numerous CG tax calculators (knowing they’re flawed, but wanting an idea), they are ALL taxing me at a rate which indicates the CG are added to our income, and taxing us NOT at the 0% federal tax rate for LT CG, but at the next tier. Some of these calculators go so far as to ask for 401k contributions (~$1k), number of kids (2), itemized deductions (we’ll take standard deduction, etc…
There is no capital gains tax in North Carolina; the gains are included as income and taxed at the flat income tax rate of 5.25%.
I feel like many articles and even responses split hairs in a way that leaves me not understanding what is probably quite simple.
So, married, filing jointly in NC. Income is well under the threshold (of $89,250) affording a 0% federal tax rate on LT CG.
Where am I going wrong?
Simply put, if our income is so low, and we fall within the 0% LT CG tax rate:
1) do we indeed pay ZERO federal taxes on the LT gains?
2) is there a max/limit on how much stock we can sell at 0% federal tax?
3) do the capital gains ACTUALLY end up bumping us up to a new tax bracket (despite what I wrote above and have read many times), and in that case, are we subjected to LT CG tax after all?
For round numbers as an illustration… let’s assume our joint income is $50k. Assume we sell all of our stock for $100k in long term capital GAINS. Our income is taxed normally, then NC would tax us at a flat 5.75% rate on those gains. However, wouldn’t the federal income tax on the entirety of the gains (all $100k) be taxed at 0% due to our low income and the LT CG tax rates for 2023?
Please help! It’s got to be simple, but I have read a concerning number of articles from seemingly reputable financial agencies and tax agencies, and info in the forums, that tell me I’ve got this all wrong. And if I do t have it wrong, why can’t I find a single tax calculator/estimator whose output is 0% for the LT CG.
Thank you in advance!
