Avoid higher tax bracket
When I sell stock, I pay 15% tax until my income from capital gains exceeds $445,850. However, the proceeds from the sale does not count as ordinary income.
When I have a distribution from either the 401K or IRA it is considered ordinary income and will impact the income tax brackets.
I am doing both and want to make sure that I don’t push myself into a higher tax bracket. So, as I understand it, as long as my ordinary income stays under $329,850, I can avoid the 32% tax bracket. I can exclude the sale of stock and the dividends when figuring out my income.
As long as my income (excluding dividends and proceeds from a stock sale) is under $329.850, I will remain in the 24% tax bracket and as long as my income from capital gains does not exceed $445,850, I remain in the 15% capital gains bracket.
Are the above statements correct?
Permalink Submitted by Anthony Romano on Sun, 2021-07-11 12:08
After doing some research I believe the above statements are incorrect. Below is an excerpt from the IRS website. Adjusted Gross IncomeAdjusted Gross Income (AGI) is defined as gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to Income include such items as Educator expenses, Student loan interest, Alimony payments or contributions to a retirement account. Your AGI will never be more than your Gross Total Income on you return and in some cases may be lower. Refer to the 1040 instructions (Schedule 1) PDF for more information.