Tax School Practice Test 2025 – The All-in-One Guide to Mastering Your Tax Exam!

To determine Lenore's total California state tax on her long-term capital gain of $5,000, it's important to understand how long-term capital gains are taxed in California. Unlike the federal tax system, which often has lower rates for long-term capital gains, California taxes capital gains as ordinary income. This means they are subject to the same tax brackets as Lenore's regular taxable income.

Lenore's taxable income before capital gains is $78,000. Once the long-term capital gain of $5,000 is added to this income, her total taxable income becomes $83,000. California has a progressive income tax system, with rates that increase with higher income levels.

To find the tax on the additional income, we need to determine if this additional capital gain pushes Lenore into a higher tax bracket or not. Based on California’s tax brackets, for a single filer in 2023, part of Lenore's income will be taxed at different rates. The calculated tax on income for someone earning $78,000 typically falls within a specific range of tax brackets, and the addition of the $5,000 may not significantly increase the effective tax rate.

Given the complexity of California's tax brackets, a portion of Lenore's income