Comments on: 0% Capital Gains Tax Rate Really Exists

By: Jason

Jason — Sun, 15 Jan 2012 14:20:58 +0000

I have what I think is a unique situation. I earn roughly $21k a year, however, I am lucky enough to have $50k in stock of which easily $45k is capital gains. Also, this is a long term holding greater than 5 years.

If I want to sell this stock (and this assumption being based on the stock market remaining flat) would I be best suited to pay the least amount of taxes if I were to sell about $8k this year at a 0% tax rate and then sell the rest of the stock next year when the qualified five-year taxrate for my bracket drops to 8%?

By: James

James — Wed, 13 Apr 2011 20:36:25 +0000

@Eric: Interesting approach. But unless I’m missing something, you still have to pay corporate income tax on those dividends, right? So your tax savings on dividends is [(personal income tax rate) - (corporate income tax rate + dividend tax rate)]*DividendAmount, right?
And you can’t be a personal services corp, and still need to pay yourself a salary if you actively participate.

Still, seems like with a low dividend tax rate, you could get some savings depending on tax bracket.

By: Eric

Eric — Thu, 04 Nov 2010 19:02:51 +0000

If you are MFJ, the first $68k of your gains would be taxed at 0% federal since that is the cutoff for the 25% tax bracket. Anything above $68k would be taxed at 15% federal.

- My state of CA doesn’t have a cap gains rate, so the $250k would be taxed as ordinary income (up to 9.55%).

- You have deductions and exemptions that will decrease your taxable income. Standard deduction of ~$11k (for MFJ) and exemptions of ~$7k (or more if kids) will allow $84k or more of tax-free gains. Note that exemptions start to phaseout for income > $250k.

- Any other income, earned or passive, will decrease the tax-free amount, of course. If you have W2, interest, and other income such that your net taxable income is $68k, you won’t get any 0% cap gains rate.

I own a C corp. I paid myself nothing the last 3 years and just harvested my cap gains and declared dividends such that I was able to get about $300k out federally tax free. I still paid about $25k in CA taxes, though.

By: Carnival of Financial Planning – Edition #152 – July 30, 2010

Carnival of Financial Planning – Edition #152 – July 30, 2010 — Sun, 01 Aug 2010 22:59:17 +0000

[...] DuPaix presents 0% Capital Gains Tax Rate Really Exists posted at My Dollar Plan, saying, “Find out why 2010 could be your year for cashing out [...]

By: » Winner Of Our $25 Visa Gift Card Giveaway

» Winner Of Our $25 Visa Gift Card Giveaway — Wed, 28 Jul 2010 11:58:12 +0000

[...] 0% Capital Gains Tax Rate Really Exists [...]

By: michael

michael — Wed, 21 Jul 2010 14:17:51 +0000

How does this work. If I have no earned income but cash in $250,000 in capital gains do I still get the 0% capital gains rate? Or does the $250,000 capital gains push me into the higher rate?