Question 1173407: If you are in the 26% tax bracket for ordinary income and have a 15% capital gains rate, how much tax will you save (in $) by waiting for an investment to become long-term before selling it if your taxable profit from this investment is $45,000?
capital gains rates
up to $38,700 = 0%
$38,700-$426,700 = 15%
over $426,700 = 20%
not sure how to begin with this problem because there is no example in my book.
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! not sure if this is correct, but .....
if 45,000 was not capital gains, then it would be taxed as ordinary income at 26% = 11,700
if 45,000 was capital gains, then it would be taxed as capital gains at 15% = 6,750.
the savings would be 11,700 - 6,750 = 4,950
here's a reference that i think might help.
https://www.investopedia.com/ask/answers/052015/what-difference-between-income-tax-and-capital-gains-tax.asp
the general idea, as i see it.....
if the asset is held less than a year, then it is taxed as ordinary income.
if the asset is held more than a year, then it is taxed as capital gains.
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