QUESTION
How will my tax bracket me affected by 1 million dollars in investment returns?
Asked on Dec 04th, 2010 on Taxation - Illinois
More details to this question:
An investment of mine pans out a 1 million dollar payout. I choose to pay taxes (I assume it is 35%) once I cash out. My current head of household taxable income is 47,000. How will my tax bracket be affected from that day or years forward? I see gambling winnings that are, for example, $ 8m, take home is 2.5 m. I am trying to understand, are there more fees and taxes associated with gambling winnings than investment earnings or what should I plan on paying out for a 1 million investment earnings? And how will my future tax bracket be affected?
1 ANSWER
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Your tax is based on your income, including investments and gambling income, during the calendar year. The income tax bracket and the capital gains tax is computed anew every year; it does not carry over from previous years. The tax bracket is based on the amount of income during the year, on a graduated scale, although the investment income is a flat rate, depending on whether it is short term or long term capital gain. You should consult with an accountant to have him compute your tax liability.
Answered on Dec 06th, 2010 at 1:43 PM