After a short conversation with a neighbor, successful and younger, HE said I'd be subject to a 28% capital Gains tax, no matter what my income is.
I've looked and tried to figure it out, and frankly, I couldn't find anything specific to my situation ... so I turn to FReepers and ask ...
I'm in Pennsylvania, I'm 66 and my income (again, projected for 2014) will be less than 27K (SS and royalty)
Have at it FreepeRs ... and thanx
It is money you should not be collecting because it is not fair
How was the money reported to the IRS? 1099? K-1?
It depends on the total yearly amount, if you get no other income and you fall under the poverty line, you ‘might’ have to pay no taxes.
I have an relative that lives off of such royalties and he pays the Feds over $10K in estimated taxes every quarter.
Take it as you will, your mileage might vary, etc.
...When you sign your taxes it says To the best of your knowledge all the info is true so you will be ok until they audit you three years from now. Just pay pennies on the dollar then.
I did the same deal and made a good profit. I was about 70 then and, aside from attorney fees, I received all of the profit. There was no capital gains tax. Three years thereafter I spoke directly to IRS in DC. I owed no other taxes.
My tax advice is don’t take tax advice from a discussion forum
A Capital Gain is a profit on a Capital Asset. Example: Your house, you paid 100K and sold it for 120K, the 20K is a capital gain.
So if you just made a profit off of a product from your Capital Asset it is just income and you only pay taxes on it if you made enough to have to pay taxes.
Regardless of what is owed, you have to compete a tax form.
Fill out your tax form and you will have your answer.
Royalty is considered income.
Your tax preparer is right. Capital gains is just one source of income — if your total income (capital gains + other income) is such that you pay no taxes, you don’t pay taxes on the capital gains.
But if your “other income” is such that you pay no taxes, but your capital gains is very large, that would push you into total income bracket where you pay taxes, you will have to pay taxes on it.
E.g. if your other income is $10,000, but you got $100,000 in capital gains, you will most certainly have to pay capital gains taxes.
However the advice you get here are only things to think about, NOT to take it as gospel and act upon it, most certainly not taxes — telling the IRS that you followed some anonymous posters advice on FR will not be an excuse, especially these days. ;)
You might want to get TurboTax and fill it out and see what it tells you and check with another taxpreparer also.
It’s capital gains and passive income.
That is: you don’t punch a time card for your money.
28%...