In December 2019, Ben and Jeri (married filing jointly) have a long-term capital gain of $55,000 on the sale of stock held for 4 years. They have no other capital gains and losses for the year. After the standard deduction, their ordinary income for the year, before the capital gain, is $70,000, making their total income for the year $125,000. In 2019, married taxpayers who file jointly pay tax of $8,012 on the first $70,000 of ordinary taxable income and 15% on long-term capital gains above $78,750. What is their total tax liability?

Question

Quizplus · Accepted Answer

The total tax liability is calculated by adding the tax on ordinary income to the tax on long-term capital gains. The tax on the first $70,000 of ordinary income is $8,012. For the long-term capital gains, since their total income is $125,000, the portion of the capital gain that is taxed at 15% is $46,250 ($125,000 total income - $78,750 threshold for 15% tax rate). The tax on the capital gain is therefore $46,250 * 15% = $6,937.50. Adding the two amounts gives a total tax liability of $8,012 + $6,937.50 = $14,949.50.

In December 2019, Ben and Jeri (Married Filing Jointly) Have