Question

1. In 2020, single taxpayer had ST capital gains/(losses) of $10,000 and ($5,000) and LT capital gains/(losses) of $10,000 and ($8,000). The taxpayer’s ordinary taxable income before considering capital gains/(losses) is $100,000. Calculate the taxpayer’s total taxable income and tax liability?  

2. In 2020, MFJ taxpayer had ST capital gains/(losses) of $10,000 and ($5,000) and LT capital gains/(losses) of ($10,000) and $8,000. The taxpayer’s ordinary taxable income before considering capital gains/(losses) is $500,000. Calculate the taxpayer’s total taxable income and tax liability?  

Answer 1

Total Taxable income of single taxpayer

= Ordinary income + STCG + LTCG

= $100,000 + $ 5,000 +$ 2,000

= $ 107,000

Total Tax = 10% of 105,000 + 0% on $2,000

= 10,500

Note 1) we are assuming 10% bracket here.

2) LTCG is nil if gain is less than $ 38,400.

2) Total Taxable income of MJF

= Ordinary income + STCG + LTCG

= $500,000 + $ 5,000 +$ 2,000

= $ 507,000

Total Tax = 10% of 507,000 + 0% on $2,000

= 50,700

Note 1) we are assuming 10% bracket here.

2) LTCG is nil if gain is less than $ 77,200.