Investment Income

[Thad]

I have a client with only investment income (dividends, interest, capital gain and stock sales). On his federal return, line 43, his table income is $25,172. Beyond this line, there is no further information to calculate a tax liability. On the Virginia State return, he is getting hit with a huge liability at $1616. Why is there a major difference between the two tax authorities? I did not feel comfortable releasing the tax return to the client until I get some guidance from my peers. Thanks for any assistance...help.

[Maude Lebowski]

Zero percent capital gains rate.

[Burke]

Virginia does not have a special tax rate for any type of income or filing status. Everybody pays the same rates. For taxable income up to $17,000 it is $720. Over that it is 5.75% of the excess, added to $720. www.tax.virginia.gov/income-tax-calculator.

[kathyc2]

I have a client with only investment income (dividends, interest, capital gain and stock sales). On his federal return, line 43, his table income is $25,172. Beyond this line, there is no further information to calculate a tax liability. On the Virginia State return, he is getting hit with a huge liability at $1616. Why is there a major difference between the two tax authorities? I did not feel comfortable releasing the tax return to the client until I get some guidance from my peers. Thanks for any assistance...help.

Your software likely produces a worksheet that details out the preferred tax treatment of items at LTCG rates. I suggest you print it out and study it so in the future you understand how it works, rather than just relying on software to "get it right".

[Thad]

A Hearty Thanks

Thanks to all that gave me clear and understandable guidance regarding my inquiry. It was very helpful and enthusiastically accepted.

[Y2KEA]

"client with only investment income"

dividends:
How much is qualified dividends

interest:
How much is muni interest which is not VA sourced?

How much is LTCG from stock sales and/or distributions?

Does VA apply ordinary income for QD & LTCG or is it the same as federal?

[Burke]

Does VA apply ordinary income for QD & LTCG or is it the same as federal?

VA taxes all income, including these items, at regular rates. No special QD or LTCG treatment.