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Harvesting Stock Gains: 0% Capital Gains Tax

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Harvesting GainsIn the December special issue of Kiplinger’s magazine, Mary Beth Franklin put together a list of tax moves that can save you big money. Normally, these tax moves are the same from year the year. Her list has a few old standbys that are also on Kay Bell’s list of year end tax moves like giving to charity and checking your tax withholding. However, there are also some 2009 specific ones such as the home energy tax credit and the first time homebuyer’s credit.

The one that really jumped out at me was one about capital gains. The standard year end tax advice is that you can offset gains with losses and, should you have only losses, use losses to offset $3,000 of ordinary income a year. If you lock in more than $3,000 in losses, you simply carry the excess over into the next year.

The new wrinkle they talk about is how tax filers in the 10% or 15% tax bracket, in 2009 and 2010 tax years, pay 0% capital gains tax on qualified dividends and long term capital gains. The 15% tax bracket for 2009 ends at $67,900 for married couples filing jointly and $33,950 for single filers. Remember, that’s taxable income, so take your gross income and deduct exemptions, credits, and other deductions.

If you recently lost your job and saw your income fall, this might be a good time to harvest stock market gains and not pay any capital gains taxes on them.

(Photo: mcdermottd)

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3 Responses to “Harvesting Stock Gains: 0% Capital Gains Tax”

  1. Chuck says:

    I’m lucky enough to still have my job, but this is a really good tip to soften the blow for those that don’t. The first year after this job, I plan to take a year off and do this and a lot of Roth conversions. :)

  2. Laura says:

    So if my joint income is less than $67,900 for 2009, can I sell an unlimited amount of stock (Intel) and not have to pay taxes on ANY of the capital gains? Is there no maximum amount I can sell? I’m retired and becuase I was not required to take a distribution from my IRA this year, my income falls below the $67,900 threshold. I am seriously considering taking advantage of this option and then re-purchasing stock later. Is this a sound strategy??

    • Steven says:

      I would assume the gains count towards income still.

      e.g. Your AGI is $60k, you can only have $7,900 in gains tax-free. The rest will be taxed normally.


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