CAPITA GAINS
So what exactly is included in the "taxable income " used to determine your capital gains tax rate?
Answers
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All of your income, minus your any adjustments and either the standard deduction or your itemized deductions. Your capital gains are included.
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But it's all your taxable income not all income - right? What about return of capital distributions from mutual funds like GABUX? IT's income but not taxable. Also what about interest income on muni bonds also not taxable?
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Great question!
I believe you'll find your answer directly on the IRS' Qualified Dividends and Capital Gain Tax Worksheet. This is the worksheet used to figure your tax if you have qualified dividends or capital gains. See page 36 of the link below:
Line 1 of that worksheet is your taxable income. This does NOT include tax-exempt interest. You should note, that capital gain distributions from mutual funds are taxable. Capital gain distributions do qualify for long-term capital gain tax treatment. See the link below:
