Q & A and Tips on Accounting, Taxes and Personal Finance.

Cash In on 0% Capital Gains Rate

November 1, 2019 | By More

capitalgains-taxWhile the maximum capital gain tax rate can be as high as 23.8 percent, most taxpayers pay 15 percent. But there is the possibility to have your capital gains go tax-free; zero percent! In fact, this tax break has been around for more than a decade and comes into play more often than you may think. Here is what you should know:

Qualifying for the 0% capital gains rate:

You qualify for preferential long-term gain treatment if you sell stocks, bonds, or real estate (and other capital assets) you’ve owned longer than a year.

For 2019, the zero percent rate applies to long-term capital gains for single taxpayers with taxable income up to $39,375 and married filing joint taxpayers up to $78,750. This often applies if you’re having a low income tax year due to:

• Temporary job loss
• A tax loss passed through to you from an S corporation or partnership
• Income fluctuation for a commission-based job
• Retirement
• Moving to part-time employment

Awareness is the key.

While you may not typically have the zero capital gain tax rate available to you, it is important to note when it comes into play.

Here’s an example: John and Mary Smith recently retire. They have a number of mutual funds they’ve owned for years and have retirement savings accounts. Their current income is $58,700. Should they withdraw money from a retirement account or sell some of their mutual funds? Because they’re aware of the zero percent capital gains, they decide to sell mutual funds with long-term capital gains of $20,000 this year to get the money tax free!

Consider your year-end tax moves:

So, keep the zero percent capital gains rate in mind as the year winds down. Know your projected income for the year and depending on your situation, you might realize capital gains that are subject to no or lower tax rates. Remember other factors often come into play, including the taxability of Social Security Benefits, so call if you would like a review of your situation.

Contributed by Catherine Patel – Enrolled Agent, MBA, California Real Estate Broker
Tax Matters is located in El Segundo, California. For more information or to contact Catherine Patel, visit http://www.CaliforniaTaxMatters.com

Article information should not be used exclusively to make legal, financial or tax decisions. Because laws and rules can change frequently, topics may not always be updated to reflect these changes or may not apply to your unique situation. It’s prudent to seek out the advice of a professional for your specific needs.

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Category: Taxes

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