I fell in tax bracket of X last year and my salary is same today. But I have short term capital gains to file this year. So is the tax bracket X still apply for both my salary and capital gains or does it change based on the total of (salary + capital gains) amount?
it is based on your total income, after your deductions,,,,,, so yes,,, the short term gains would be added to you salary,,,,,, whether it is enough to move you into a new bracket, would depend on exactly were you were before,,,,, high end or low end of the X bracket, and how much the gains are
The "tax bracket" is based on your "regular" taxable income, which includes salary + interest + non-qualified dividends + short-term capital gains + prizes/gambling winnings + some other things MINUS exemptions and deductions (standard or itemized), so a lot of things besides salary can affect which bracket you are in.
That said, I think a lot of people make too big a deal out of being "thrown in a higher tax bracket". The higher rate only applies to the income above the top of the prior bracket. So, for example, if your income is $100 above the lower limit for the 25% bracket, you only pay 25% on that $100, not your entire income. That's only $10 more than it would be if you were still in the 15% bracket. I think a lot of people think if you go in the higher bracket, you have to pay the higher rate on ALL of your income, which isn't true.
|
