Replies to post #38920 on Pilgrim Petroleum Corp. (PGPM)

[Chiron]

So let's say you earn 230k from your job that puts you in the 28% bracket. If you make 10k on a stock trade does that now put you in the 33% bracket (over 233k married) or is that 10grand stock trade just taxed at 28%?

I guess do stock trades count as regular income towards your bracket or just investment income?

[Beardeus]

This is not how income taxes work. If you only made a $1,000 into the 25% tax bracket, you only pay 25% on the $1,000 and not 25% on your entire income.

[penn_e_pincher]

Doesn't make sense to me that you took a hit like that. My understanding is that taxes are progressive. You pay 10% on the portion of your earnings in the 10% bracket, 15% on the portion of your earnings in the 15% bracket, 25% of your earnings in the 25% bracket, 28% of earnings in the 28% bracket, etc. Like this:

Total earnings = $40,000
10% x $9325 = $932.50
15% x ($37950-$9325) = $4293.75
25% x ($40000-37950) = $512.50

Total tax is 932.50+4293.75+512.50 = $5738.75

Note that $5738.75 is an effective tax rate of 14.35% because your earnings in the 25% bracket are only $2050 (the $512.50 in taxes that you pay at the 25% rate is only for the $2050 you earned within your highest bracket).

This is federal taxes, I don't know if state is same or different. Also, I did not account for any possible deductions, but we'll assume $40k is the adjusted gross income.