Check my tax logic?

[RedmondStash]

I'm still getting to grips with taxes on investment income vs. employment income. For the first time, we may not have actual employment income next year.

We are married, filing jointly.

So, for 2018, if we move $19,050 from an IRA to a Roth (to stay in the 2018 10% tax bracket), and then we realize another $58,350 in long-term capital gains from investment income (to stay in the 2018 15% tax bracket), is it true that we would only pay $1,905 in taxes, because we would pay 0% on the capital gains if our income stayed at or under $77,400?

(I'm ignoring things like standard deductions and Social Security payments to simplify things, just to see if I get how the tax tables work.)

Thanks.

[terran]

You've pretty much got it, but it's actually even a little better than that. Assuming no other income (unlikely because you'll probably have at least some interest, dividends and capital gains distributions) you could actually convert 4150 x 2 + 13000 + 19050 = $40,350 from traditional to roth because of the personal exemptions and standard deduction. Not sure why you'd ignore them.

Of course this is under the current tax code, so you'll have to wait and see what happens with the new tax bills.

[RedmondStash]

You've pretty much got it, but it's actually even a little better than that. Assuming no other income (unlikely because you'll probably have at least some interest, dividends and capital gains distributions) you could actually convert 4150 x 2 + 13000 + 19050 = $40,350 from traditional to roth because of the personal exemptions and standard deduction. Not sure why you'd ignore them.

Of course this is under the current tax code, so you'll have to wait and see what happens with the new tax bills.

Thanks. I wouldn't ignore those things in real life; I just wanted to be sure my conceptual understanding of the tax brackets and how they relate to types of income was correct.

[terran]

In that case, yes, you have in conceptually right. Earned income, traditional to roth conversions, short term capital gains, and non-qualified dividends will fill up the standard deduction, personal exemptions and each bracket. After that is qualified dividends and long term capital gains which will be taxed at 0% if they fall in the 15% bracket, if not then only those that fall above the 15% bracket are taxed at a higher rate (15% to start). Whatever you do, make sure your Earned income, traditional to roth conversions, short term capital gains, and non-qualified dividends are at least $21,300 to use up the "0% bracket" made up of personal exemptions and standard deduction. This amount seems likely to change for 2018 with the tax bill they're trying to pass, so probably best to wait for that to be settled.

[RedmondStash]

In that case, yes, you have in conceptually right. Earned income, traditional to roth conversions, short term capital gains, and non-qualified dividends will fill up the standard deduction, personal exemptions and each bracket. After that is qualified dividends and long term capital gains which will be taxed at 0% if they fall in the 15% bracket, if not then only those that fall above the 15% bracket are taxed at a higher rate (15% to start). Whatever you do, make sure your Earned income, traditional to roth conversions, short term capital gains, and non-qualified dividends are at least $21,300 to use up the "0% bracket" made up of personal exemptions and standard deduction. This amount seems likely to change for 2018 with the tax bill they're trying to pass, so probably best to wait for that to be settled.

Thanks, Terran.