Capital Gains – Line 6

Covered CA MAGI Income?

Almost everything you own and use for personal or investment purposes is a capital asset

Examples include a

  • home,
  • personal-use items like household furnishings, and
  • stocks or bonds held as investments.

When you sell a capital asset, the difference between the basis in the asset and the amount you sell it for is a capital gain or a capital loss.

​2019 1040 Form   

Line 8b Adjusted Gross income then add line 2a, 5a &

7a (Foreign Income)

to get Covered CA MAGI Income

 

2019 Schedule 1  Additional Income & Adjustments to Income

Capital Gains and Losses

When you sell a capital asset, the sale normally results in a capital gain or loss. A capital asset includes most property you own for personal use or own as an investment.

Capital Assets.

Capital assets include property such as your home or car, as well as investment property, such as stocks and bonds.

Gains and Losses.

A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.

Net Investment Income Tax.

You must include all capital gains in your income and you may be subject to the Net Investment Income Tax if your income is above certain amounts. The rate of this tax is 3.8 percent. For details, visit IRS.gov.

Deductible Losses.

You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.

Limit on Losses. 

If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.

Carryover Losses.

If your total net capital loss is more than the limit you can deduct, you can carry it over to next year’s tax return.

Long and Short Term. 

Capital gains and losses are treated as either long-term or short-term, depending on how long you held the property. If you held it for one year or less, the gain or loss is short-term.

Net Capital Gain. 

If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain.

Tax Rate. 

The tax rate on a net capital gain usually depends on your income. The maximum tax rate on a net capital gain is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gain.

Forms to File.

You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses, with your tax return.

For more information about this topic, see the

Schedule D instructions and

Publication 550, Investment Income and Expenses.

Related Tax Forms & Publications?

How much does  Term Life Insurance to cover any loans and protect your family run?

 
Publication 544, Sales and Other Dispositions of Assets (PDF 321K)
 
Schedule D, Capital Gains and Losses (PDF 134K)
 
 
Form 1040, U.S. Individual Income Tax Return (PDF 136K)
 
Publication 505, Tax Withholding and Estimated Tax (PDF 367K)
 
Publication 550, Investment Income and Expenses (PDF 516K)
 
Publication 17, Your Federal Income Tax (PDF 2075K)
 
Publication 564, 551 – Mutual Fund Distributions (PDF 178K)
 
Publication 547, Casualties, Disasters, and Thefts (PDF 133K)
 
Publication 527, Residential Rental Property (Including Rental of Vacation Homes) (PDF 187K)
 
Publication 536, Net Operating Losses (NOLs) for Individuals, Estates and Trusts (PDF 213K)
How to Depreciate Property IRS Publication 946 for 2003

More IRS Tax Publications Related to Capital Gains

Learn More ⇒IRS Tax Topic 409

Report most sales and other capital transactions and calculate gain or loss on

Form 8949 (PDF), Sales and Other Dispositions of Capital Assets,

then summarize capital gains and deductible capital losses on

Form 1040, Schedule D (PDF), Capital Gains and Losses.

Publication 505, Tax Withholding and Estimated Tax

Form 1040, Schedule D (PDF), Capital Gains and Losses

Publication 550, Investment Income and Expenses

551 – Basis of Assets

Publication 544, Sales and Other Dispositions of Assets

Topics 701 and 703, and Publication 523, Selling Your Home.

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, such as stocks, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only your capital losses on investment property, not personal property.

How much does  Term Life Insurance to cover any loans and protect your family run? A “paper loss” – a drop in an investment’s value below its purchase price – does not qualify for the deduction. The loss must be realized through the capital asset’s sale or exchange.

 

Instant Medical Insurance Quotes

 

More Explanation 

Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. For more information on the tax rates, refer to IRS Publication 544, Sales and Other Dispositions of Assets.

If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).

Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040. This year, the capital loss carryover worksheet has been removed from the Instructions for Schedule D to simplify tax preparation. However, there will be a worksheet in the 2004 Instructions to Schedule D to figure a capital loss carryover to 2004.

If you have a taxable capital gain, you may be required to make estimated tax payments. See Publication 505, Tax Withholding and Estimated Tax, for information on estimated tax.

The top tax rate on net capital gain (i.e., net long-term capital gain reduced by any net short-term capital loss) has been reduced from 20% to 15% (and from 10% to 5% for gains that would otherwise be taxed at a regular rate of 10% or 15%) for property sold or otherwise disposed of after May 5, 2003 (and installment sale payments received after that date). The reduced rate applies for both the regular tax and the alternative minimum tax. The higher rates that apply to unrecaptured section 1250 gain, collectibles gain, and section 1202 gain have not changed.

Dividends paid by most domestic and foreign corporations after December 31, 2002, are eligible for the new maximum capital gains tax rate of 15% (5% in some cases).  Qualified dividends are reported on line 9b of Forms 1040 or 1040A.

Additional information on capital gains and losses is available in Publications 550, Investment Income and Expenses, and 17, Your Federal Income Tax. You may download the publications from this Web site or order your free copies by calling 1-800-TAX-FORM (1-800-829-3676).

Taxpayers who have experienced investment or other types of financial losses should also check out these other IRS publications:

How much does  Term Life Insurance to cover any loans and protect your family run?

Source IRS Tax Tip 2004-34, Feb. 19, 2004

Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.

TITLE 26–INTERNAL REVENUE CODE  Subtitle A–Income Taxes               

CHAPTER 1–NORMAL TAXES AND SURTAXES  Subchapter B–Computation of Taxable Income PART III–ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME Sec. 121.

Exclusion of gain from sale of principal residence Estate Planning

Private Annuity Trust?

Do you need an Attorney?

How much does  Term Life Insurance to cover any loans and protect your family run?

FAQ

 

How does long term capital gains ($180k) from investment property sale affect Covered CA coverage?

****It’s not that it affects coverage, it may affect subsidies.  The question is, does it go on line 13 of your 1040?

Capital Gains Line 13

 

Capital Gains Line 13

****What winds up on line 37?

  • Does it throw me off the “subsidy”  chart for CoveredCA?

***You can still get coverage.  It’s just that you won’t have subsidies – tax credits.  We would be happy to help you obtain the best coverage for your needs.  It just won’t be that you get subsidies this year… next year?   When do you report this income, 2017 or 2016?   If 2016, you will probably have to give back the subsidies you collected this year when you file 2016 taxes.

  • If so, what is the bronze level price range I can get?

****Please enter your dates of birth, zip code and MAGI income line 37* into our complementary quote engine in the upper right of this page.   2017 rates will be available 11.1.2016.

Some stats:

  • House hold: Under CoveredCA (Ages Me xx, wife xx, child x) +  Under Medicare/Midi-cal (Mother xx)
  • Household income: $73K /yr (excluding Mother’s SSI)

***Is your Mother on your tax return as a dependent?

You are correct, SSI doesn’t get added back in for MAGI Income.  Is this income for 2016 or 2017?

 How to do Schedule D – Capital Gains  

Instructions

Capital Gains & Losses  Video

Schedule D

Schedule D

Publication 550

publication 550 investment income & expense

Report changes as they happen - within 30 days!
Visit our webpage on how to report changes 

report changes as they happen

IRS Video on Life Changes

IRS Video on life changes

 

VITA get your taxes done Free  

VITA get your taxes done FREE

Free help to file taxes VITA
Volunteer Income Tax Assistance

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including subsidy calculation

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14 comments on “Capital Gains – Line 6

  1. If I sell off some stock and realize about $15,000 in gain from it, and

    I am in the 0% long term capital gains bracket because of my total income and family size,

    do I still count this $15,000 toward my MAGI for Covered CA even though I will not be taxed on this by the IRS?

    • I think the bottom line is, what # will you be putting on line 6 of your tax return?

      Note also that Form 8962 Premium Tax Credit Reconciliation asks for AGI Adjusted Gross Income and doesn’t say anything about line 6 capital gains not counting if you have low income.

      If your income is lower than $39,375 (or $78,750 for married couples), you’ll pay zero in capital gains taxes.

      If your income is between $39,376 to $434,550, you’ll pay 15 percent in capital gains taxes. And if your income is $434,551 or more, your capital gains tax rate is 20 percent. https://www.acorns.com/money-basics/taxes/how-are-stocks-taxed/

      While Covered CA’s list of countable income above says to only count taxable portion I’m not sure if that includes what you are talking about as your saying your income is low enough to pay zero in taxes.

      Taxable Capital Gains probably means, after you subtract your costs – basis.

      MAGI income is line 8b – Adjusted Gross Income + other things, see above. It says nothing about an exclusion for taxable gains if you have low income. Will the capital gain take your income above the zero amount?

      42 CFR 435.603(e) calculates income as defined by 26 U.S.C. § 36B. Any taxable capital gain on the
      sale of a home is included in AGI and must be entered on IRS Form 1040, line 13, capital gains (IRS Form 8949 and schedule D).

      I checked with my own CPA and he didn’t know the answer, but he did point out that just because income is not subject to tax, doesn’t mean it’s not MAGI Income for APTC subsidies.

      Covered CA nor their agents are allowed to give tax advice. See VITA above.

      • What my CPA said 5 years ago about the calculation and reporting for subsidies.

        The cost of preparing the paperwork to get them properly qualified to receive the benefit would exceed anything I could reasonably charge them. The instructor, a fine fellow from Iowa, stated he unfortunately had to agree with me. So now tax preparers will have to decide whether to accept clients based on our health care system — just like doctors. Town Hall

      • Long-term capital gains tax rates for the 2020 tax year
        FILING STATUS 0% RATE 15% RATE 20% RATE
        Single Up to $40,000 $40,001 – $441,450 Over $441,450
        Married filing jointly Up to $80,000 $80,001 – $496,600 Over $496,600
        Married filing separately Up to $40,000 $40,001 – $248,300 Over $248,300
        Head of household Up to $53,600 $53,601 – $469,050 Over $469,050 See better formatting click on the following link https://www.bankrate.com/investing/long-term-capital-gains-tax/

      • Here’s the reply I got from Covered CA

        Household will need to speak to a tax professional to confirm what will be their taxable portion. Once they confirm the amount then that is what would need to be reported. If they have no taxable portion then they do not need to report any capital gains.

        • A little more clarification from Covered CA

          The Covered CA application needs to match the tax filling information.

          Member will need to speak to a tax professional to confirm what income he will be reporting and that is the income that would go on the application.

    • Reference Materials:

      Settlements – Taxability
      https://www.irs.gov/pub/irs-pdf/p4345.pdf

      Award Settlement Guide
      https://www.irs.gov/pub/irs-utl/lawsuitesawardssettlements.pdf

      I’ve won a lawsuit and will soon receive a large award of money damages.
      Do I have to pay taxes on this money?

      The glow of victory may begin to dim after you get your attorney’s bill. As if that disappointment isn’t enough, we have more sobering news — the IRS may try to claim its share of the total. So postpone that trip to Cabo, and read on.

      According to the tax code, the only damages you can enjoy tax-free are those that compensate you for physical injury or physical sickness. (26 U.S.C. § 104(a).) So if this describes your case, you will probably keep the cash safely away from the grip of the IRS. Nolo.com

  2. If I sell my home and have a capital gain (even after the Sec 121 exclusion), will that gain affect my Modified AGI? Will that gain count toward the income which could push my income high enough to require me to pay back my State Exchange subsidy?

    • I believe so. I’m not a tax attorney. I will check with one though or a CPA. In the meantime, do NOT cite my reply, but check the links to actual law or government publications.

      Here’s more on the Section 121 exclusion, sale of a home – primary residence.

      Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.
      (b) Limitations….

      So, whatever you have as Capitol Gains in Schedule D, gets added to line 13 of your 1040 and thus increases line 37 where MAGI – Adjusted Gross Income starts then add in, non taxable Social Security, foreign income and exempt interest. See our page on MAGI – Modified Adjusted Gross Income.

      Check out Sale of your home publication #523

      Learn more about paying back subsidies when you do your taxes in Publication 974

      Get free quotes and calculate subsides here.

      It’s possible to that you might have penalties in addition to paying back the subsidy.

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