The question applies to the US federal income tax for tax year 2018.
To make things concrete, let's suppose I have $50k in ordinary income and $50k in long term capital gains. I plan to use the standard deduction of $12k for a single person.
How would the standard deduction be applied in this situation?
To clarify: If there were a single tax rate applied to all sources of income there'd be no problem. But different tax rates apply to ordinary income and to LT capital gains. Given that this is the case it is essential to know how the standard deduction is allocated. In the example, does it reduce ordinary income by $12k; or does it reduce ordinary income by $6k and LT capital gains by $6k; or does it reduce LT capital gains by $12k; or...?