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Tax Breaks

Tax-Free Capital Gains: A Tax Break for the Middle Class

Taxpayers in the two lowest brackets owe no tax at all on long-term gains and qualified dividends.

For most people, long-term capital gains are taxed at 15%. Same goes for qualified dividends. The wealthiest investors are taxed at 20%.

See Also: The Most Overlooked Tax Deductions

But investors in the two lowest income tax brackets pay no tax at all on capital gains and dividends. That can be a nice break for retirees, who are not taxed on some or all of their Social Security benefits. The unemployed, who may have had to tap their investments to make ends meet, can also benefit.

To take advantage of the zero-percent capital-gains rate for 2015, taxable income can't exceed $37,450 if you are single; $50,200 if you are a single head of household with dependents; or $74,900 if you are married filing jointly. Note that this is taxable income. That's what's left after you subtract personal exemptions, as well as your itemized deductions or standard deduction, from your adjusted gross income.

There are plenty of other ways to save when you file your return. Check out eight more tax breaks for the middle class.