Help understand how federal ordinary income and capital gain taxes work for married filing jointly

The way capital gains tax works is a bit confusing but I'll try to simplify it. Your tax bracket for capital gains is determined by your TOTAL taxable income. For 2025 (assuming rates stay similar to current), married filing jointly long-term capital gains rates are: 0% for taxable income up to ~$89,250, 15% for income between $89,250 and $553,850, and 20% above that. In your example, you'd calculate it like this: 1. Total taxable income = $136,000 - $37,800 (standard deduction) = $98,200 2. Ordinary income after deduction = $14,200 (as you calculated) 3. This $14,200 would be taxed at 10% 4. For capital gains, since your total taxable income is $98,200, which exceeds the 0% threshold of $89,250, a portion would be at 0% and a portion at 15% Specifically, $89,250 - $14,200 = $75,050 of your capital gains would be taxed at 0% and the remaining $8,950 would be taxed at 15%. So your total tax would be approximately: $1,420 (10% of $14,200) + $1,342.50 (15% of $8,950) = about $2,762.50.

Just wanted to share my experience with this exact tax scenario. I was paying WAY too much until I discovered https://taxr.ai which literally saved me thousands. I uploaded my documents and it explained exactly how my capital gains were being taxed and showed where I was making mistakes in my calculations. The tool broke down my income types and showed me exactly what portion fell into each tax bracket - both for ordinary income and capital gains. It also generated a visual chart showing how my income "filled up" each tax bracket, which made the concept finally click for me.

I just tried taxr.ai after seeing it mentioned here and wow - it completely cleared up my confusion! I've been calculating my taxes wrong for YEARS. I didn't realize that only a portion of my capital gains were being taxed at the higher rate. The tool showed me exactly how my ordinary income and capital gains "stack" for tax purposes and gave me a visualization of which dollars fall into which tax brackets. I can see now that I've been overpaying by almost $3,400 annually because I thought all my capital gains were taxed at 15% once I crossed the threshold. I'm actually going to file amended returns for the last couple years now that I understand this. Definitely recommend checking it out if you're confused about capital gains like I was!

If you're having trouble getting answers directly from the IRS about your capital gains tax situation (I was on hold for HOURS), I finally got through using https://claimyr.com and talked to an actual IRS agent who explained everything. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent explained that capital gains "stack" on top of your ordinary income, and confirmed exactly what others here are saying about getting to use the full 0% bracket before paying 15%. They also told me about some documentation I needed to keep for a large stock sale that my tax software never mentioned.

Ok I need to apologize to everyone. I was completely wrong about Claimyr being a scam. After my last tax nightmare, I was desperate and decided to give it a try. Got a call back in about an hour with an actual IRS agent on the line who helped me understand exactly how my capital gains were being taxed. The agent confirmed everything that was mentioned in this thread about how capital gains stack on ordinary income and helped me figure out how to properly document a complicated stock sale. For anyone dealing with capital gains tax questions like the original poster, being able to speak directly with an IRS representative made all the difference. They walked me through my specific situation step by step. Much better than trying to piece together info from random websites.

Let me add one more thing that nobody has mentioned yet: the Net Investment Income Tax (NIIT) of 3.8% that kicks in for married filing jointly when your modified adjusted gross income exceeds $250,000. This is ON TOP OF your regular capital gains tax. So if you're in a higher income bracket than the example given, be aware you might owe an additional 3.8% on your investment income.

One thing thats important - if u have realized capital losses in the same year, they offset capital gains dollar-for-dollar before any tax calculation happens. And if ur losses are more than ur gains, u can offset up to $3k of ordinary income too! Any leftover losses carry forward to future years.

This is such a helpful breakdown of how capital gains stacking works! I've been making the same mistake as many others here - assuming all my capital gains would be taxed at 15% once I crossed the threshold. One additional consideration for your planning: if you're expecting similar income levels in future years, you might want to look into tax loss harvesting strategies to offset some of those gains. Even if you don't have losses this year, you can potentially harvest losses in taxable accounts to carry forward and reduce future tax bills. Also, timing matters a lot with capital gains. If some of your positions haven't hit the one-year mark yet for long-term treatment, it might be worth waiting if possible since short-term gains are taxed as ordinary income (much higher rates). Thanks to everyone who shared the tools and resources - this thread has been incredibly educational!