Getting bumped up to a higher tax bracket?

[tacks]

Individual has 30K in ordinary income in 2010 so he is therefor in a 15% bracket.

What if... If he sells stock for a net gain of 15K his taxable income will then increase to 45K and therefor he will be in the 25% bracket.

Is that correct?

[snowshine]

Assuming you meant 30k in taxable ordinary income to begin with, then yes, he would officially be in the 25% marginal bracket. The extra money in this case is taxed as capital gain, however, so he wouldn't actually get anything taxed at 25% under this scenario.

[tacks]

Thanks Snowshine,

That's exactly what i was getting at. It's really not that all that simple, is it. This is more in depth than i normally get into.

Gotta think about how i'll explain this to clients.

[ChEAr$]

Thanks Snowshine,

That's exactly what i was getting at. It's really not that all that simple, is it. This is more in depth than i normally get into.

Gotta think about how i'll explain this to clients.

Use a visual aid to explain it.

If you don't already have one, create your "sample" client in your tax software. Mine is
named "Junior Samples", SSN 111-22-3333, and sometimes depending on the scenario,
he has a wife, Sue, named after that mythical creature at the Doraville (Atlanta) service center who used to sign all taxpayer letters.

Do a sample return for the first "layer" of income, print it out, then go back and add the
capital items and print out that 1040 for comparison.

Coincidentally I just had an email from a client this morning who asked me the effect of cashing in his mutual funds, so when he gets back to me with basis of the fund, and using current price of the fund, I'll be able to do
this very same thing for him.

[tacks]

Thanks again, ChEA.

Actually i'm assisting a financial advisor as to how best advise clients. So i can't/won't advise him to do that.

But you give me very good ideas as to how best approach this.

[WhiteOleander]

My "fake" account's name is "Hard Worker". The spouse's name is "Really Hardworker". My clients get a kick out of that. They say they can relate to these t/ps, especially the spouses.

[tacks]

funny

[JohnH]

Harlan: Do you think it's a good idea to use the word "Sue" when discussing anything with a client, even a hypothetical? Don't want to plant any wierd ideas in their heads...

[SueBaby]

Harlan: Do you think it's a good idea to use the word "Sue" when discussing anything with a client, even a hypothetical? Don't want to plant any wierd ideas in their heads...

Yeah, since my name is Sue.