Taxes on capital gains

I receive a huge capital gain on shares bought 18 years ago. With my other income I am in a 20 percent bracket. As I understand it, 60 percent of my long-term capital gain is exempt. Then, I take 20 percent of the remaining 40 percent as regular income during the year I sell the stock. Is this correct? --

No. You are taking an extra step. At your 20 percent marginal tax rate, you should be including 40 percent of the long-term capital gain as ordinary income and paying 20 percent of that in actual taxes. For example, suppose you sold stock for $1,100 that you bought years ago for $100. Your long-term capital gain is $1,000. Present law permits you to exempt 60 percent, leaving $400 to be included as ordinary income when reporting for that year.

You've read  of  free articles. Subscribe to continue.