I want to know how capital gains taxation works to understand better about taxes. To make it very simple lets say that Federal capital gains tax rate is 20% and state capital gains tax rate is 10%. And all capital gains tax rates and income is for long term only. And if the income is 100K, then all I have to pay is:
A) 20% of 100K
B) 20% of 100K to Federal + 10% of 100K to State?
All I am trying to understand is, whether if we have to pay for both separately. Because if you consider short term capital gains, then you have to pay 50% (approximately) of your income to taxes if you make more than 530K assuming you live in a state that has capital gains or state tax of 8 to 12 percent.