How much are capital gains taxes

how much are capital gains taxes

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Determine Gross Income

Gross income means all of the money you made that may be taxable. Gross income includes wages, tips, commissions and bonuses from a job. This information is on your W-2 form and in the “year-to-date” section of the last pay stub for the year. Add self-employment earnings as well. Count non-wage income like interest, dividends and gains from the sale of capital assets. Add any taxable distributions from tax-deferred plans such as 401(k)s or traditional IRAs. You should receive a 1099 form documenting earnings from each financial institution where you have an account that provides non-wage income.

Deduct, Deduct, Deduct

Subtract personal and dependent exemptions from your gross income. You get one personal exemption for yourself, another for your spouse and one dependent exemption for each person you can claim as a dependent. Total up other deductions. Some examples of things you may be able to write off are state and local taxes, mortgage interest, contributions to tax-deferred accounts and qualified educational or medical expenses. If these itemized deductions add up to more than your standard deduction, you’ll save on taxes by using them.

Compute Taxes Already Paid

The amount of payroll taxes withheld by your employer can be found on your last pay stub or W-2 form. If you paid estimated taxes because of self-employment or

non-wage income, add the amount to payroll taxes paid. You may have had additional taxes withheld if you took a taxable distribution from a tax-deferred account. Add these payments in as well to find the total of taxes already paid.

Compute Tax Liability

Tax liability is the total amount of taxes you owe before taking withholding into account. The Internal Revenue Service provides two ways to calculate tax liability. You can look up the tax amount in tax tables that come with the instructions to your 1040 tax form. Alternatively, you can use the percentage method, also described in the 1040 instructions. You must use the percentage method when taxable income exceeds the maximum covered by the tax tables. Figure tax on long-term capital gains separately, since the tax rate is different. Use IRS Schedule D (Form 1040) for capital gains tax.

Figure Your Refund

Subtract taxes withheld from your tax liability. Also, subtract any tax credits you qualify for, such as the Child Tax Credit. If taxes withheld combined with tax credits are more than the tax liability, you get a negative number that is your estimated tax refund. Suppose your tax liability is $6,000 and you had $5,500 in taxes withheld plus $2,000 in tax credits. That’s $1,500 more than the tax liability, so that’s about how much you can expect as a refund.

Source: ehow.com

Category: Bank

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