In his famous op ed in August, Warren Buffett wanted the government to stop coddling him and raise his taxes. He wrote that his federal tax bill was just under $7 million, and that what he “paid was only 17.4 percent of my taxable income.”
OK so presumably that’s because most of his income consists of realized capital gains, which are generally taxed at 15 percent.
However, I am trying to use IRS Form 1040, and pretend I’m Buffett. On line 13 of the form, you report your capital gain (or loss) and mix it in with other forms of income. This gives you your AGI.
Then on the back side, you take out exemptions and deductions, and end up with your “taxable income.” Then you figure out what your tax is, based on the income.
So my question: I know that people say capital gains are taxed at 15 percent. But where exactly does that show up when we’re doing Buffett’s taxes? I see that after you get the taxable income on line 43, it’s not a simple matter to just go look up in the tax tables to see how much you owe. Instead, if you had to fill out Schedule D (which Buffett would have to because of capital gains), then you have to use other worksheets to figure the tax.
But where exactly is it? There is a worksheet in Schedule D’s instructions that, halfway down, has you multiply the figure by .15. (A little later it also brings in .28.) Are these the much ballyhooed 15 and 28 percent capital gains tax rates?
Please, if you are going to answer, it would be nice if you actually know what you are talking about. Thanks.