Capital gains 15%

Discussion in 'Fred's House of Pancakes' started by bwilson4web, Feb 12, 2021.

  1. bwilson4web

    bwilson4web BMW i3 and Model 3

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    So imagine someone has TSLA stock that is close to 10x the purchase price. Selling the stock would result in a 15% capital gains tax. But if Tesla were to get a $7,000 tax credit, how much TSLA stock could be sold tax free?
    • How much stock with a $7,000 tax credit would equal 15% tax?
    • ~$7,000 / 15% ~= $46,666 :: capital gains tax equals tax credit
    This is well above the current Std Rng Plus Model 3 with enough excess to handle getting Full Self Driving. So if I traded in my 2019 Std Rng Plus Model 3 for a new one with FSD, it would be tax neutral.

    Bob Wilson
     
  2. bisco

    bisco cookie crumbler

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    but what if the stock goes to 7,000?
     
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  3. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    Still waiting for the android version - but I'm pleased that BEVs are gaining currency in the automotive market.
    Perhaps some day they will be affordable to families who don't have to sweat about capitol gains and tax kickbacks! ;)

    Well done with the stock purchases!
     
  4. bwilson4web

    bwilson4web BMW i3 and Model 3

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    I'll drive my new Tesla there.

    Bob Wilson
     
  5. hill

    hill High Fiber Member

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    That scenario is what prompted us use 401k pre-tax dollars, converted to post tax Roth IRA dollars. Eventually, with the huge national debt, Something's Gotta Give, and it's most likely going to be those tax-free accounts will get reclassified to help out the government spending.. But folks' already taxed Roths Now climbs with taxes already paid status.
    Wish we had done a whole lot larger sum than we did, about a year ago.
    .
     
  6. Kenny94945

    Kenny94945 Active Member

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    Taxes can be complicated and personal.
    Capital gains are taxed at a different rate than income.
    Then, I think you know this, but not mentioned, the cap gain is the sales price less the cost of each share, which may have different costs.

    Also not sure if an income tax credit reduces cap gains tax (or self employment tax).
    There there may be state taxes too.

    Perhaps best is to try a free tax software and try some examples.

    Good luck with your project goals.
     
  7. fuzzy1

    fuzzy1 Senior Member

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    From my quick non-professional skim of the tax forms, it appears that taxes are figured first, at Line 16 (of Form 1040-SR, and I already know you are old enough for the -SR version), then credits are subtracted out later at Line 22. Thus, your EV tax credit has no impact on what tax bracket your capital gains fall in to. I.e. the credit won't pull any additional capital gains down from the 15% to the 0% bracket.

    Before exercising this path, if you are using computerized tax software, run a sample test case. Or ask someone actually qualified to answer. And note that how much of your capital gains land in the 0% vs 15% (or even 20%) brackets is very dependent on your other taxable income.
    70 on ours, but most of them don't need to be printed, not even for tax file backup.
     
    #7 fuzzy1, Feb 12, 2021
    Last edited: Feb 12, 2021
  8. mikefocke

    mikefocke Prius v Three 2012, Avalon 2011

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    I wish you luck, BW.

    Had to talk to a CPA on a question. I actually caught my bank making an error in a statement they sent me which they are correcting. Why should filing taxes be so complex? I own no property, no business, not even employed. Easily 6 hours. TurboTax decided that my federal and state taxes with backup sheets should result in 72 printed pages!
     
  9. Salamander_King

    Salamander_King Senior Member

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    Well, less than a year ago, TSLA was already too expensive for me. So, I bought some FCEL instead. That's now over 25x of the purchase price. And I don't even own Mirai. LOL
     
    #9 Salamander_King, Feb 12, 2021
    Last edited: Feb 12, 2021
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  10. sam spade 2

    sam spade 2 Senior Member

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    But are they REALLY.......in all circumstances ?

    A few years back I had a substantial real estate sale that resulted in a large capital gain.
    I could swear that, after a few minor adjustments, the gain from that transaction ended up in the same taxable total along with my other "ordinary" income and was taxed at somewhat more than 15%.
    Might not, but it sure looked like it.

    I asked my tax accountant. They assured me that it was done right.
    I had other priorities at the time and let it drop.
     
  11. Salamander_King

    Salamander_King Senior Member

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    Was that your primary residence? And did you purchase a house to replace it as a primary residence? IIRC, the sales and the purchase of a primary residence are treated differently in terms of capital gain. I don't remember paying a penny on the capital gain on the sale of my primary residence when we moved out of the large city at the peak of the real estate bubble.
     
    #11 Salamander_King, Feb 13, 2021
    Last edited: Feb 13, 2021
  12. sam spade 2

    sam spade 2 Senior Member

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    NO. Farm land.
     
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  13. Salamander_King

    Salamander_King Senior Member

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    OK, that explains.
     
  14. fuzzy1

    fuzzy1 Senior Member

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    "A substantial real estate sale" ... "large capital gain" -->> 20% capital gains tax bracket.

    Here are the current brackets (2020, not back when you had that sale):
    upload_2021-2-13_14-59-35.png

    Without knowing your specifics, it is entirely possible that one's ordinary income can run just to the top of the 12% bracket, then the big capital gains stacked on top of that fills up its 15% bracket and spills over into its 20% bracket.

    If so, the preferential capital gains treatment was still a major benefit. If treated as ordinary income, it would have filled up the 22%, 24%, and 32% brackets, spilling over into the 35% and possibly even 37% brackets.
     
    #14 fuzzy1, Feb 13, 2021
    Last edited: Feb 13, 2021
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  15. mikefocke

    mikefocke Prius v Three 2012, Avalon 2011

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    As one who has some stock he bought 50 years ago, I wish the cost basis was adjusted for inflation. Then pay your ordinary rate on top of that. Make stock an investment, not a gamble. Even up us capitalists with wage earners.
     
  16. sam spade 2

    sam spade 2 Senior Member

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    BUT.....it pisses me off that virtually EVERYBODY only talks about the "15% rate on capitol gains".
    Which apparently is NOT true in all cases.

    If I had known the truth of the matter, maybe I could have "adjusted" some things to keep it all in the 15% bracket.

    Just another big lie, I guess.
     
  17. jdenenberg

    jdenenberg EE Professor

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    Sam,

    The biggest lie is that they count inflation as part of your capital gains. Only the gains in excess of inflation should be subject to taxation.

    JeffD
     
  18. I'mJp

    I'mJp Senior Member

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    Short term, < 1 year gets taxed at your personal rate.
    Long term > 1 year, gets capitol gains tax, from capital gains table.
     
  19. fuzzy1

    fuzzy1 Senior Member

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    Oh boo hoo hoo. Cry me a river. This is something that generally impacts only the very filthy rich, not ordinary commoners or even upper upper middle class.

    There was no big lie here, just a lack of due diligence commensurate with your stratospheric income that year. If you want correct rich-people tax advice, don't ask the ordinary poor and middle class people who will never hit those brackets.

    The full and correct brackets are easily and freely available from the IRS and from many of the money advice sites available to people who simply aspire to reach these levels.
     
    #19 fuzzy1, Feb 14, 2021
    Last edited: Feb 14, 2021
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  20. Salamander_King

    Salamander_King Senior Member

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    Finished the tax last night. This year was a bit more complicated. In addition to 1040, I had to submit the schedule 1 for additional income adjustment, the schedule D for short term capital gain, Schedule E for supplemental income, form 8880 for IRA credit, and form 8936 for PHEV credit. Still, Easy Peasy. Finished it in less than a half-hour using TurboTax software which I have been using for over a decade for my tax. It produced a total of 32 pages of documents including the worksheet for my record only. But the actual tax form filed is only 10 pages long. Now just sit tight and waiting for the refund in my bank account.

    BTW, my short-term capital gain this year was not taxed. I had enough previous years' capital loss carryover from decades ago to offset the gain this year.
     
    #20 Salamander_King, Feb 14, 2021
    Last edited: Feb 14, 2021
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