Would a 0% tax rate help you live an even better retirement? In this week’s Retirement Headline, we’ll explore a WSJ article titled How You Can Grab a 0% Tax Rate. If that doesn’t pique your interest, I don’t know what will!

Listen in to hear how you can learn to plan so that you can take advantage of a 0% tax rate on capital gains income.

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Outline of This Episode

  • [1:42] How to grab a 0% tax rate
  • [7:08] 4 ways to take action
  • [11:22] How will lowering my taxable income affect my future Social Security benefits?

Many taxpayers don’t take advantage of this tax provision

Many people don’t know about the 0% tax rate on investment income which applies to taxpayers across tax brackets. This provision in the tax code allows some individuals to pay zero taxes on their capital gains and dividends from taxable investment accounts. The 0% rate applies only to investment income in taxable accounts and does not cover retirement accounts such as traditional IRAs or 401Ks. Even though 7% of filers are eligible for this provision, it is usually overlooked.

The 0% tax rate on investment income is a valuable tax-saving opportunity that is often overlooked. Share on X

Who can qualify for the 0% rate

To qualify for the 0% rate, filers need to meet certain income thresholds. For 2023, the limits are $44,625 for single filers and $89,250 for joint-filing couples.

However, the 0% rate can apply to a larger portion of income due to adjustments made to taxable income, such as itemized deductions or the standard deduction. This means that single filers can potentially have up to $58,475 of capital gains and dividends taxed at 0%, while married joint filers could have up to $116,950.

This capital gains rate could be a benefit to individuals in a low-income year due to job loss or those in early retirement. When taxable income is lower, individuals can take advantage of the 0% rate to minimize their investment income tax burden.

However, not all taxpayers automatically qualify for the 0% rate. Listen in to hear who would not be eligible for this rate.

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How to use the 0% tax rate to your advantage

Some investors may choose to use the 0% rate to rebalance their portfolios or reset a cost basis for capital gains. By selling appreciated assets and immediately repurchasing them, investors can raise their starting point for measuring taxable gains without triggering a taxable event.

Younger taxpayers can also benefit from the 0% rate if they have eligible gains or dividends before they enter their peak earning years. This can be especially advantageous for individuals who have invested in assets like cryptocurrencies that have appreciated in value.

The 0% tax rate on investment income is a valuable tax-saving opportunity that is often overlooked. By understanding the rules and strategically planning their finances, taxpayers can take advantage of this provision and reduce their overall tax burden on investment income.

Those planning for retirement have additional lessons they can learn. Listen in to hear what you can do to benefit from this special tax rate in retirement.

Resources & People Mentioned

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