The IRS Will TORPEDO Your Retirement with Taxes. Learn the Rules NOW!

[@Bondbeer]

Long term capital gains definitely count toward provisional income. $50k plus half of SS will put your SS into taxable status.

[@SeasideWealth]

Good call! You also don’t want to forget that tax free muni income counts towards your provisional income.

[@meemka8251]

Using your example, if this couple's income placed them in the 12% tax bracket, realizing $50k in long-term capital gain should not have increased their provisional income and resulted in higher tax bill. In this scenario, their provisional income should not have gone up regardless of how much long-term capital gain was realized. Well done Seaside, but please explain.

[@SeasideWealth]

Yes, your long-term capital gains count toward your provisional income (or combined income) regardless of your tax bracket, including if you’re in the 12% ordinary income tax bracket. However, if your taxable income (excluding Social Security) keeps you in the 0% long-term capital gains tax bracket, you won’t owe federal taxes on your capital gains themselves. That said, these gains still count toward your provisional income and can affect whether your Social Security benefits are taxable.

[@meemka8251]

@@SeasideWealth In other words, both LTCGs and municipal bond dividends count toward provisional income. The latter are Federal tax exempt. The former are Federal tax exempt up to the 12% (ordinary income) Federal tax bracket. Thank you, Seaside, for the detailed yet simple explanation! This is just one of many reasons why you are simply the best!