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

For 2023, the zero percent rate applies to long-term capital gains for single
taxpayers with taxable income up to $46,625 and married filing joint taxpayers
up to $89,250. This zero percent rate can apply if you’re having a low income
tax year due to:

But you could also have a higher income and qualify for this zero percent rate.
For example, if a married couple earns $116,950 in 2023, their taxable income
would equal the $89,250 zero percent rate threshold after subtracting the
$27,700 standard deduction for a married couple.

Awareness is the key

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

Here's an example: Jack and Diane recently retired. 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 $25,000 in
capital gains to get the money tax free!

Make a plan

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. 

If you would like a review of your situation, click here to learn more about our tax and consulting services.

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