Is this possible?

[97guns]

Just curious if you think this guy is jyving me:


We paid $356 on over $103k of income in 2016

2/3rds of the income was qualified dividends or long-term capital gains that are taxed at 0% if your total income is in the 15% tax bracket or lower. The remaining 1/3rd was largely offset by itemized deductions and exemptions... so ordinary taxable income was only about $5k and the little tax on that was largely offset by foreign tax credit... leaving a small residual net tax due.

PS. I actually read the wrong line in my prior post... the net tax due was $187, not $356.

[AJSimon]

Just curious if you think this guy is jyving me:


We paid $356 on over $103k of income in 2016

2/3rds of the income was qualified dividends or long-term capital gains that are taxed at 0% if your total income is in the 15% tax bracket or lower. The remaining 1/3rd was largely offset by itemized deductions and exemptions... so ordinary taxable income was only about $5k and the little tax on that was largely offset by foreign tax credit... leaving a small residual net tax due.

PS. I actually read the wrong line in my prior post... the net tax due was $187, not $356.

There may well be 50 people on this board more qualified than I to answer your question, but the first thing that jumps out at me is to wonder how you have $103k in income, but somehow your "total income" has you in the 15% bracket (upper range is $37,950 for single filers, or $75,900 for married filers). Do dividends and capital gains not count toward total income (honestly asking)?

[97guns]

There may well be 50 people on this board more qualified than I to answer your question, but the first thing that jumps out at me is to wonder how you have $103k in income, but somehow your "total income" has you in the 15% bracket (upper range is $37,950 for single filers, or $75,900 for married filers). Do dividends and capital gains not count toward total income (honestly asking)?

This is the only information he offered up

[greenskeeper]

Just curious if you think this guy is jyving me:


We paid $356 on over $103k of income in 2016

2/3rds of the income was qualified dividends or long-term capital gains that are taxed at 0% if your total income is in the 15% tax bracket or lower. The remaining 1/3rd was largely offset by itemized deductions and exemptions... so ordinary taxable income was only about $5k and the little tax on that was largely offset by foreign tax credit... leaving a small residual net tax due.

PS. I actually read the wrong line in my prior post... the net tax due was $187, not $356.

If the bold is true, then he paid $187 on $34k of taxable income, which depending on deductions sounds possible.

Another reason for a flat tax, which will never happen, but one can dream right?

[MonkeyMama]

Yes, absolutely. I think it's hard to be more tax efficient than that.

Did you just get married last year? There's more of a single tax penalty these days (versus marriage tax penalty), as you just realized.

[MonkeyMama]

To clarify how it works:

$103,000 Total Income
-12,600 standard deduction
- 8,000 2 exemptions (didn't look it up, but know it's around $4k per person)
-----------
82,400 Taxable Income

You probably had other deductions or losses to lower your "taxable income".

15% tax bracket is up to $75,300 (taxable income). Any dividends/capital gains up to $75,300 total income are taxed at 0%. It's only the amount above that which would be taxed at a higher rate.

[JBinKC]

If you are paying that amount of tax with 103 k of income I am 100% sure you will trigger the Alternative Minimum Tax because your MFJ exemption is approx. 84 k. To avoid this tax keep your income under the AMT threshold

The 0% rate applies up to a 75300 gain.

Another issue to watch out for is if you are selling rental property all of the past depreciation has to be recaptured and paid under ordinary income and not considered a capital gain because the past deductions were taken off of rental income which is ordinary income.

[MonkeyMama]

If you are paying that amount of tax with 103 k of income I am 100% sure you will trigger the Alternative Minimum Tax because your MFJ exemption is approx. 84 k. To avoid this tax keep your income under the AMT threshold

AMT is completely N/A in this situation. AMT uses the same capital gains tax rates as the regular tax code (0%, in this case). You don't end up in AMT just because you have more income.

[JBinKC]

I totally disagree. In most cases the amt would kick in on income between 84 k and 103 k given that extremely low tax rate unless you have amt exempt issues or a Roth IRA distribution sighting some general examples

[MonkeyMama]

OP, ask your tax preparer if you should worry about AMT.

[MonkeyMama]

I totally disagree. In most cases the amt would kick in on income between 84 k and 103 k given that extremely low tax rate unless you have amt exempt issues or a Roth IRA distribution sighting some general examples