Sara is filing as head of household and has 2014 taxable income of $57,000 which includes $3,000 of net long-term capital gain. The net long-term capital gain is made up of $1,000 25% gain and $2,000 0%/15%/20% gain. What is the tax on her taxable income using the alternative tax method?

Question

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The tax on the ordinary income ($54,000) is calculated using the head of household tax rates. The $2,000 of 0%/15%/20% gain is taxed at 15%, and the $1,000 of 25% gain is taxed at 25%. The total tax is $8,463.

Sara Is Filing as Head of Household and Has 2014