Tax Experts

Capital Gains Tax Rate for Low Income Brackets

By Kevin McCormally, Editorial Director, Kiplinger.com

April 2008

Q: If the capital gains rate for low income rate people in 2008-10 is zero is there a limit to how much it can be and how will it be reported on tax forms? -- Norma L.

Kevin's Answer

Yes, there is a limit. As soon as your capital gains push you out of the 15% bracket, then the 15% rate applies to excess capital gains.

Let's say your taxable income without the gains is $30,000 on a single return. The 15% bracket for 2007 ends at $31,850. So only $1,850 of long-term gains would enjoy the 0% tax rate. If you had $3,000 of gain, the other $1,150 would be taxed at 15%.

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