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Hoots : What do the components of the taxable income in the Schedule D Tax Worksheet mean? The Schedule D tax worksheet calculates the tax on the taxable income by first decomposing the taxable income in line 1 into lines 19, - freshhoot.com

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What do the components of the taxable income in the Schedule D Tax Worksheet mean?
The Schedule D tax worksheet calculates the tax on the taxable income by

first decomposing the taxable income in line 1 into lines 19, 20, 28, 31, 37 and 40,
then taxing on them at different tax rates of regular tax rate, 0, 0.15, 0.20, 0.25, and 0.28. The resulted taxes are in lines 42, 21, 29, 32, 38 and 41.
finally summing their taxes into line 43

I wonder what the amounts in lines 19, 20, 28, 31, 37 and 40 mean?

Without understanding what they represent, it is hard to understand the rationale underlying the worksheet. My purpose is to

understand which part of the taxable income is taxed at which tax rate, and
sort the different parts of the taxable income according to their tax rates, and
find out which parts have relative high tax rates, and which have low tax rates.

Thanks.

p.s.

Do you agree that the worksheet was written like a computer program with little readability, e.g. no suggestive names for most lines?

What are some ways for us to understand the worksheet?


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This worksheet is actually one of the most difficult parts of the tax code to understand.

First, I suggest you start by understanding the Qualified Dividends and Capital Gains Worksheet as the Schedule D Tax worksheet includes this worksheet. Look at this flowchart:

(source: thetaxadviser.com).
Second, in addition to the regular capital gains rates, the schedule D tax worksheet adds 2 extra tax rates. The 25% rate is for depreciation recapture (or unrecapture might be more accurate), and the 28% tax rate is for collectibles (coins, art, appreciable objects).

Hope this helps shed some light. If you wanted to make a flowchart (a la the above link) I would definitely appreciate you for it!


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