Tax Bracket Application

Jul 16, 2014 2 Replies
H

A few questions:


1) For ACA subsidies, do I correctly understand that there is a threshold based on AGI, which is approximately $46,000 for a single person?

Also, I presently live with my parents, both of whom are on Medicare. Does this mean that for ACA subsidy purposes I'm in a household of 3?


2) How do the lower tax brackets for capital gains work? I have some securities I bought in 2009 and saw that they are elgible for 0% capital gains in some circumstances. Say I am filing single where the 15% bracket ends at $36K taxable income, and let's say my AGI is $40K and my taxable income is $30K. Does this mean I could take $6K of capital gains on these securities for "free?" More? Less?
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A

For 2014, it is $45960 for a single person. Income is your MAGI defined as your AGI plus any excluded foreign income, plus any untaxed social security benefits plus tax-exempt interest/dividends.

No.

Yes.

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M

No disagreement with anything Alan wrote. But a few additional comments:

Your parents are not your dependents, are they? I haven't researched whether that matters, but I do belive that household size includes only those dependents you actually claim on your return. It's clear your parents can't claim you.

On the securities and capital gains item, you can sell enough to generate the tax free amount of cap gains, then immediately buy back the same securities. It's almost criminal not to, in your situation (only expense is trading fees in your brokerage account, and you do end up re-starting the clock for holding period).

Also, unless your state has no income tax or conforms to federal, you will probably trigger state tax (no cap gains rate in CA, for example).

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