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How do you include the state income tax for capital gains tax?

Increase your capital gains rate box by the state income tax rate.
Increase your state income tax rate is 7% and your clients’ federal capital gains tax rate is 15%, then you’ll put 22% in your capital gains rate box.

Please note: there is not a federal capital gains tax deduction for the state income tax paid as there is for federal income tax.  See the calculation below:

This first part the software handles automatically.

INCOME TAX

Federal Income Tax Rate 
Federal Capital Gains Tax Rate
State Income Tax Rate
15% 
15% 
7%

Marginal Federal Income Tax = 15 * (1-.07)
State Income Tax
Total
= 13.95%
= 7.00%
= 20.95%

This second part you must put in MANUALLY.

CAPITAL GAINS TAX

Federal Capital Gains Tax  Rate
State Income Tax Rate
Total
= 15%
= 7%
= 22%

Again you’ll put 22% in your Capital Gains Rate BOX

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