Back in April, I penned a post called, Two Awesome Benefits of Being Income Poor but Asset Rich. And in this post, I made a serious error concerning the calculation of a capital gains tax. I was under the impression that there was no capital gains tax on any capital gain you had if your income was under $75,300 (i.e., the upper limit of the 15 percent tax bracket). But thanks to Brad over at Maximize Your Money, I now know that my understanding of the capital gains tax was incredibly wrong.
You only have a zero tax liability on the capital gain that extends from your adjusted gross income (AGI) up to the ceiling of the 15 percent tax bracket ($75,300 for the 2016 tax year). For tax purposes, a capital gain sits on top of your AGI, so to speak. So if my AGI was $30,000, and I had a capital gain of $50,000, my total income would be $80,000. The first $45,300 of that capital gain—the difference between $30,000 and $75,300—wouldn’t be taxed. The amount over $75,300—$4,700—would be taxed at 15 percent.
So a big shout out goes to Brad for pointing out my error. I want whatever I write on this blog to be factual. I don’t give a flip about protecting my ego. Accordingly, I have made the necessary corrections to that post. (Hey, Brad, when you get a chance, can you check out the new capital gains calculation I made in this post? I think I got it right.)
First, Ronald Reagan coined the phrase, “trust but verify,” when dealing with the Soviets. That adage applies equally well to anything you read on this or any other personal finance blog. No blogger in the PF community wants to pass on false information. But we are human, and we will make mistakes. So check out multiple blogs and sources to determine the veracity of any PF information you come across.
Second, the PF community is awesome. When Brad pointed out my error, he didn’t call me a jerk, or claim I was a moron. He just very politely suggested that I might be wrong. And that’s the way it should. No one in the PF community is out to score points and denigrate other bloggers. We’re here to help ourselves (and our readers) do a better job navigating the wacky world of money. We’re completely selfless. And because of this, I’m proud to be part of the PF community.
Okay, groovy freedomists, that’s all I got. Please “trust but verify” any PF tidbits I throw your way. And if you do find an error in this blog, please let me know in the lovingly PF way.