Tax-free Capital Gains Are Here
Some taxpayers will pay no capital gains taxes on their 2008 returns.
Talk about the ultimate irony: The long-awaited era of tax-free capital gains has arrived just as the stock market has suffered one of its worst routs since the Great Depression.
Still, some investors -- perhaps those who bought stocks years ago through a discounted employee stock plan -- may still be able to sell their shares at a profit. And if they are in one of the two lowest income-tax brackets, they will pay no taxes on their capital gains if they sell before the end of the year.
The 0% capital-gains rate for those in the 10% and 15% income-tax brackets is scheduled to apply in 2009 and 2010 as well. But some skeptics worry that Congress may rescind the measure in future years as lawmakers search for revenue to offset other tax changes. So if you’re likely to benefit from this strategy -- perhaps if you are self-employed or retired and can control the timing of your income -- grab this tax break before it disappears.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
To qualify for preferential long-term capital-gains treatment, you must hold shares for more than a year before selling. (This applies to assets in taxable accounts, not those in retirement accounts, which are taxed at your ordinary rates upon withdrawal.)
And to take advantage of the 0% capital- gains rate this year, your taxable income can’t exceed $32,550 if you are single, $43,650 if you are a single head of household or $65,100 if you are married filing jointly. Note that this is taxable income. That’s what’s left after you subtract personal exemptions -- worth $3,500 each this year for you, your spouse and your dependents -- and your itemized deductions or standard deduction from your adjusted gross income. Any gains that lift your income above that threshold would be taxed at the maximum 15% capital-gains rate.
One group of taxpayers won’t benefit from the 0% rate -- children affected by the newly expanded "kiddie tax." Starting this year, dependent children under 19 and full-time students under 24 will be affected by the special rule that applies their parents’ higher tax rate to their investment income in excess of $1,800.
-
Nasdaq Takes a Hit as the Tech Trade Falters: Stock Market TodayThe Dow Jones Industrial Average outperformed on strength in cyclical stocks.
-
$100 Fee Turning Away Visitors from National ParksDiscover how the new $100 fee will impact your experience visiting 11 of America's most popular parks.
-
Is Mechanical Breakdown Insurance Better Than an Extended Car Warranty?More insurers are starting to offer mechanical breakdown insurance to new car owners. What is it and should you buy it?
-
Are You Afraid of an IRS Audit? 8 Ways to Beat Tax Audit AnxietyTax Season Tax audit anxiety is like a wild beast. Here’s how you can help tame it.
-
States That Tax Social Security Benefits in 2026Retirement Tax Not all retirees who live in states that tax Social Security benefits have to pay state income taxes. Will your benefits be taxed?
-
10 Cheapest Places to Live in WashingtonProperty Tax Is Washington your go-to ski destination? These counties combine no income tax with the lowest property tax bills in the state.
-
3 Major Changes to the Charitable Deduction for 2026Tax Breaks About 144 million Americans might qualify for the 2026 universal charity deduction, while high earners face new IRS limits. Here's what to know.
-
Retirees in These 7 States Could Pay Less Property Taxes Next YearState Taxes Retirement property tax bills could be up to 65% cheaper for some older adults in 2026. Do you qualify?
-
Estate Tax Quiz: Can You Pass the Test on the 40% Federal Rate?Quiz How well do you know the new 2026 IRS rules for wealth transfer and the specific tax brackets that affect your heirs? Let's find out!
-
5 Types of Gifts the IRS Won’t Tax: Even If They’re BigGift Tax Several categories of gifts don’t count toward annual gift tax limits. Here's what you need to know.
-
The 'Scrooge' Strategy: How to Turn Your Old Junk Into a Tax DeductionTax Deductions We break down the IRS rules for non-cash charitable contributions. Plus, here's a handy checklist before you donate to charity this year.
