i use to live in WA. am in the process of trying to calculated top rate for 1256 contracts. I believe WA was 30.6%??? Does anyone know top tax rate for 1256 contracts for California residents? Just trying to get a calculation. Is it 30.6 plus their state of 13.3 for a total of 43.9%??? Just tied to calculate this. Is it 40.1% at Highest tax rate?
13.3% in CA. There is no long term cap gains. It’s all treated the same. Your federal max is wrong too. That’s 39.6. Yes, you can pay over half (on a marginal basis) your profits to the gov’t. Time to move to Puerto Rico.
1256 contracts are taxed at 60% long term 40% short term, so if the top marginal rate is 37% and the LT rate is 15% then you end up with 28.2% federal marginal rates on 1256 contracts assuming you're in the top tax bracket, which was the OPs question. Assuming you're also hit with the 3.8% net investment income tax then you go up to 32% top marginal rate on 1256 contracts.
You're right, I flubbed both that and the math! That gets you 26.8% (.6*.2+.4*.37) plus the 3.8% net investment for federal marginal rate, plus as you mentioned CA and most states just tax all investment income as regular income so you add your state tax. Or indeed to simplify it all move to Puerto Rico but don't forget to add the cost of your 24 hour security, private school for your kids, and the generator and gas for your electricity!
Just in case that wording is confusing for some folks... The 2018 blended rate is 26.8% The 2017 blended rate was 28%. Not to be overlooked, the maximum ordinary income rate... The 2018 maximum ordinary rate is 37% The 2017 maximum ordinary rate was 39.6% The 2018 rates are beneficial to we the people. Short-term, long-term, blended ... none of that applies to state income tax. No states that I am aware of anyway.
I read from ( green tax trader tax booklet 2018 ) top rate for 1256 contracts is 30.6%?? ( I'll cut and paste in a few ) so ok, 30.6 or 32%... do I just add the CA state tax to this, which say top is 13.1%. so do we arrive at a magic number of 43.1% for top bracket 1256 contracts for CA residents?? I'm just trying to get an estimate how much I am going to lose as looks like the family wants to stay in CA
It seems the best course of action is to speak with a tax professional in your state. And get an estimate NOW, while his/her business is slow. He/she can pencil you in quick. Get a head's up. He'll/She'll be extremely busy come end of January. The new tax form in and of itself is going to cause a backlog of time for these CPAs answering even the most basic of questions, starting in beginning of Feb. Get your homework done ahead of the rush.