Cash in on 0% capital gains tax rate

While the maximum capital gain tax rate can be as high as 23.8 percent, most taxpayers pay 15 percent. But there is the possibility to have your capital gains go tax-free. In fact, this tax break comes into play more often than you may think. Here is what you should know:

You qualify for long-term gain treatment if you sell stocks, bonds or real estate (and other capital assets) you’ve owned longer than a year.

For 2024, the zero percent rate applies to long-term capital gains for single taxpayers with taxable income up to $47,025 and married filing joint taxpayers up to $94,050. The zero percent rate can apply if you’re having a low-income tax year due to:

• Temporary job loss

• A tax loss passed through to you from an S corporation or partnership

• Income fluctuation for a commission-based job

• Retirement

• Moving to part-time employment

But you could also have a higher income and qualify for this zero percent rate. For example, if a married couple earns $123,250 in 2024, their taxable income would equal the $94,050 zero percent rate threshold after subtracting the $29,200 standard deduction for a married couple.

While you may not always have the zero percent capital gains tax rate available to you, it is important to note when it comes into play.

Here’s an example: Adam and Eve Johnson recently retire. They have a number of mutual funds they’ve owned for years and have retirement savings accounts. Their current income is $58,700. Should they withdraw money from a retirement account or sell some of their mutual funds? Because they’re aware of the zero percent capital gains, they decide to sell mutual funds with $25,000 in capital gains to get the money tax free.

So keep the zero percent capital gains rate in mind as the year winds down. Know your projected income for the year and depending on your situation, you might realize capital gains that are subject to no or lower tax rates. Remember other factors often come into play, including paying tax on Social Security Benefits, so call if you would like a review of your situation.

One of my primary objectives is to help you achieve your financial goals through a holistic approach that is tax-efficient in my wealth management and tax resolution practice. For more information, visit www.fredtfoxiii.com.

Fred T. Fox III is a Lawton businessman.