Sidney, a single taxpayer, has taxable income of $45,000 from all sources except capital gains. He has a long-term capital gain of $1,000. What is the actual tax savings Sidney receives because of any special treatment of his $1,000 long-term capital gain?

Question

Quizplus · Accepted Answer

The long-term capital gain of $1,000 is subject to special tax rates that are lower than ordinary income tax rates. In 2021, the tax rate on long-term capital gains for taxpayers in the 22% tax bracket (which Sidney falls into with taxable income of $45,000) is 15%.

Therefore, the tax savings for Sidney would be 15% of $1,000, which is $150.

Sidney, a Single Taxpayer, Has Taxable Income of $45,000 from All