<title>Set your tax bracket for estimating capital gains</title>
<category fLocale="cdn">lifeplan</category>
<klink type="prcdr">How do I set my tax bracket for estimating capital gains?</klink>
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<content>
<ol>
<li>On the <emph>Taxes</emph> menu, click <emph>Capital Gains Estimator</emph>.</li>
<li>In the left pane, click <emph>Set tax rate</emph>.</li>
<li>In the <emph>Show rates for filing status</emph> box, click your tax filing status.</li>
<li>Find the income range that includes your income level.</li>
<li>Under <emph>Select your tax rate</emph>, click the corresponding tax rate.</li>
<li>Click <emph>Done</emph>.</li>
</ol>
<p>The tax rate you selected will appear in the <emph>Results</emph> box as <emph>Short-term gain/ordinary income tax rate</emph>.</p>
</content>
<footer>
<extend>
<tease>Why and how should I use a custom tax rate?</tease>
<reveal>
<p>Set a custom tax rate if your tax filing status is not covered by the options in the <emph>Show rates for filing status</emph> box. In the box, click <emph>Custom</emph>. Use tax documents to determine the <glossary>marginal</glossary> tax rate for your income level. Type your income level and the associated marginal tax rate in the boxes. Then, at the bottom of the page, click that tax rate. (If you think you might want to investigate capital gains at different income levels, you can complete the entire form.)</p>
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<extend>
<tease>When I'm looking for my tax rate, should my income level include the capital gains from the sale of my investments?</tease>
<reveal>
<p>Yes. If your sale pushes you into a new tax bracket, the new rate is the rate at which your capital gains will be taxed.</p>
</reveal>
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<extend>
<tease>Why doesn't Money just use my effective income tax rate to estimate capital gains?</tease>
<reveal>
<p>First, long-term capital gains are taxed at a maximum of 20%. Second, short-term capital gains are taxed at your <glossary>marginal rate</glossary>, not your <glossary tNum="286989">effective income tax rate</glossary>. You determine the marginal rate when you click <emph>Set tax rate</emph> and the marginal rate is the one that appears in the <emph>Results</emph> section.</p>
</reveal>
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<extend>
<tease>Does the tax rate include any state income taxes I might have to pay?</tease>
<reveal>
<p>No. It includes only the federal capital gains tax. Some, but not all, states tax capital gains as income. If your state is one of them, you should also consider state taxes when you're considering a sale of investments.</p>
