Q: Do capital gains change tax bracket I am in?
Let's say, my annual income is around 50 K. Less than a year ago, I invested in stock markets around 10k and it became around 500K! So, my question is, does this huge short-term capital gains will change my tax bracket? With this Hypothetical values, how much tax should I pay on my capital gains?
A: First of all, congratulations on such a successful stock investment. Now, on to the tax question. If you were to cash out the investment when it was invested for less than one year, it will typically not qualify for the reduced capital gains rates. Instead it would be taxed at ordinary income tax rates. Assuming the sale of stock is in 2018, this would be covered under the new tax rates. Your question is missing key details that would allow someone to answer exactly how much tax you should pay on these gains, details such as your filing status, itemized deductions, etc. The IRS will be releasing a new worksheet for estimated tax payments taking into account the new tax laws, likely in January or February, and you could wait to use that once it's available. Otherwise, I would suggest contacting a tax professional directly and having them prepare estimates based on your specific situation.
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