Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Impact on long term capital gain and qualified dividend
Posted by: liuchingyi, December 21, 2017 01:45AM
What is the impact of new tax plan on "Long Term Capital Gain & Qualified Dividend"?
I could not find any info on this issue.

Re: Impact on long term capital gain and qualified dividend
Posted by: Kaye Thomas, December 21, 2017 08:30PM
The rates of 0%, 15% and 20% are unchanged, so not much difference here, except the benefit relative to regular tax rates is smaller.

Kaye Thomas
Fairmark.com

Re: Impact on long term capital gain and qualified dividend
Posted by: liuchingyi, December 21, 2017 08:47PM
What is the highest new tax bracket (10%, 12% or 22%) can still enjoy the benefit of no tax on long term gain & qualified dividend?
Thanks.

Re: Impact on long term capital gain and qualified dividend
Posted by: Kaye Thomas, December 24, 2017 03:27AM
I expected to find that the zero rate for LTCG and QD would correspond with the end of the 12% bracket, but for some reason I'm seeing a small discrepancy. For example, MFJ get 0% on these items up to $77,200 even though their 12% bracket ends at $77,400. Maybe a mistake in the intense time pressure under which the legislation was created?

Kaye Thomas
Fairmark.com

Re: Impact on long term capital gain and qualified dividend
Posted by: liuchingyi, December 24, 2017 05:41AM
Yes, I saw some thing similar from other source. Use income threshold instead of tax bracket.
We will find out another several months.
Thank you so much.

Re: Impact on long term capital gain and qualified dividend
Posted by: Sven, December 24, 2017 04:18PM
I think the draft House bill had the $77,400 number for the ZBA but then again its bracket amounts were very different. I am sure in the rush there was fuzzy math, which I assume TurboTax will figure out for the IRS.

Speaking of which, I think TT owes it to the American public to put out a free and preliminary version of TT2018, so folks can figure out for themselves what the tax bill means. One can not trust, from either side, what is being said about it. I am afraid most taxpayers won't have a clue what it means to them and may vote next November based on myths, lies or worse.

Re: Impact on long term capital gain and qualified dividend
Posted by: liuchingyi, December 24, 2017 07:40PM
Dear Mr. Thomas:
That is a great idea.
Thank you so much.
Have a great Chinese New Year!

Ching-Yi Liu

Re: Impact on long term capital gain and qualified dividend
Posted by: 47Percent, January 23, 2018 11:37PM
Kaye Thomas Wrote:
-------------------------------------------------------
> I expected to find that the zero rate for LTCG and
> QD would correspond with the end of the 12%
> bracket, but for some reason I'm seeing a small
> discrepancy. For example, MFJ get 0% on these
> items up to $77,200 even though their 12% bracket
> ends at $77,400. Maybe a mistake in the intense
> time pressure under which the legislation was
> created?
>
> Kaye Thomas
> Fairmark.com

When I read the draft of the house version of the bill quite a while ago, they had referenced a variable called "15% bracket" while talking about the LTCG. This is despite the fact the new tax rates didn't even have a 15% bracket.

Since the draft only contained the delta (changes) to the original magnum opus, I assumed it referred to the old tiers for 15%.

If that same language had percolated to the final version, that may explain this discrepancy.

Re: Impact on long term capital gain and qualified dividend
Posted by: 47Percent, January 26, 2018 01:59AM


It looks like my guess was correct.

The following is an excerpt from a financial blog post which I found to be a comprehensive, yet understandable summary of all the changes under TCJA:

============
Capital Gains And Qualified Dividends Retain Old Thresholds Under TCJA

Under current (soon-to-be-prior) law, the thresholds for the 0%, 15%, and 20% long-term capital gains (and qualified dividend) rates are based on the thresholds for the individual tax brackets: those who fall in the 10% and 15% ordinary income brackets get 0% rates, while income in the 25%, 28%, 33%, or 35% brackets gets the 15% capital gains rate, and income in the top 39.6% bracket gets the 20% preferential rate. (In addition, the 3.8% Medicare surtax on Net Investment Income applies on top, producing a maximum capital gains rate of 23.8%.)

However, while the new TCJA rules introduce new tax brackets, and slightly re-draw the tax bracket thresholds, preferential rates for long-term capital gains and qualified dividends will continue to use the old thresholds. As a result, preferential capital gains and qualified dividend rates will no longer line up cleanly with the ordinary income tax brackets.

Instead, the 0% capital gains rate will end at $38,600 for individuals (and $77,200 for married couples), even though the bottom two tax brackets end at $38,700 and $77,400 (although it’s possible a future Technical Corrections act will re-align these).

More significantly, though, the transition from 15% to 20% capital gains rates will also continue to use the “old” top tax bracket thresholds of $425,800 for individuals and $479,000 for married couples – which would now fall in the middle of the new 35% brackets, rather than being aligned to the top 37% brackets. Even as the 3.8% Medicare surtax on net investment income will also continue to apply with its own not-indexed-for-inflation thresholds of $200,000 of AGI for individuals ($250,000 for married couples).
===========

For those interested the link is:

[www.kitces.com]



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