<title>Specify your tax bracket in the Purchase Wizard</title>
<category fLocale="cdn">lifeplan</category>
<klink type="prcdr">How do I specify my tax bracket in the Purchase Wizard?</klink>
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<content>
<extend>
<tease>Why?</tease>
<reveal>
<p>If you're considering selling investments to finance a purchase, Money can help you decide which investments to sell. Money calculates the total of a potential sale and estimates the taxes that would be due. To make sure that these estimates are accurate, it is important that you specify your tax rate when using the Purchase Wizard.</p>
</reveal>
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<ol>
<li>On the <emph>Planner</emph> menu, click <emph>Purchase Wizard</emph>.</li>
<li>Follow the instructions on the screen.</li>
<li>On the <emph>How do you want to pay for this purchase?</emph> page, click <emph>Sell investments and pay cash</emph>, and then click <emph>Next</emph>.</li>
<li>Select <emph>Hand-pick the investments you want to sell</emph>, and then click <emph>Next</emph>.</li>
<li>In the left pane, click <emph>Set tax rates</emph>, and follow the instructions on the screen.</li>
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<footer>
<extend>
<tease>Why and how should I use a custom tax rate?</tease>
<reveal>
<p>Set a custom tax rate if your tax filing status is not covered by the other options in the <emph>Select your income bracket for this tax year</emph> box. In the box, click <emph>Custom rate</emph>. Use tax documents to determine the capital gains tax rates for your income level. </p>
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<tease>When I'm looking for my tax rate, should my income level include the capital gains from the sale of my investments?</tease>
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<p>Yes. If your sale pushes you into a new tax bracket, the new rate is the rate at which your capital gains will be taxed.</p>
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<extend>
<tease>Why doesn't Money just use my effective income tax rate to estimate capital gains?</tease>
<reveal>
<p>First, long-term capital gains are taxed at a maximum of 20%. Second, short-term capital gains are taxed at your <glossary>marginal rate</glossary>, not your <glossary tNum="286989">effective income tax rate</glossary>. You determine the marginal rate when you click <emph>Set tax rates</emph> and the marginal rate is the one that appears in the <emph>Results</emph> section.</p>
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<extend>
<tease>Does the tax rate include any state income taxes I might have to pay?</tease>
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<p>By default, Money includes only the federal capital gains tax. Some, but not all, states tax capital gains as income. If your state is one of them, you can enter the applicable rates under <emph>Do you want to estimate your state income tax on capital gains</emph>.</p>
