The tax rate for capital gains is 0% if your total taxable income is below $77,200 (if married filing jointly). But does "total taxable income" include capital gains, or not?
For example, suppose my other income sources total up to $70,000, and I also have $50,000 in capital gains. Which of the following descriptions is correct?
- My total taxable income is less than $77,200, so the $50,000 in capital gains is untaxed.
- My total taxable income is $120,000, which is above the $77,200 threshold, so I pay taxes on the capital gains.