The long-term capital gain tax (the stocks you have them for over 12 months) could be the lowest in 2010, and continue similar savings in 2011 and 2012. Now it could be the best time to sell these profitable stocks and you can buy them back right away.
If your adjusted income is $67,900 or less for joint return, you're in the 15% bracket in 2010. Then your long-term capital gain tax this year is 0 according to Wikipedia I glanced thru briefly.
Personally I sold big gainers and I virtually payed 0 tax on the gains in 2010. I've the accountants from Yahoo! Group to confirm it. At first I thought my gains would push me to higher tax bracket, so most gains would be taxed higher. However, it does not turn out that way.
My strategy: Sell long-term gainers in 2011 and 2012. Sell losers in 2013 and convert 401K to Roth in 2013. In 2011 and 2012, try not to have any incomes that would move up my tax bracket.
Transfer some profitable stocks to your children (ok to transfer them to me :)) if they can take advantage of this with the no tax rule. Watch out for kiddie tax implication.
You can transfer a limit of $13,000 this year. You and your wife can transfer $13,000 each to each child tax free. If you have more children and grandchildren, you have more to transfer. The limit is on cost basis, so if you bought the stock at $13,000 and now it is $26,000, it is ok to transfer all the stocks. Check the minor clause if your children is under a certain age.
If you are above this income limit, you should still have a break this year. Consult Wikipedia under US income tax for details.
It sounds rosy, but it may not. First, if your transfer money to your children and s/he is a full-time student, his/her tax rate could be the same as yours. Second, if you have a large long term capital gain, the capital gain is not added to your adjusted gross income. Hence you still enjoy the low/no Federal L.T. capital gain. However, it affects the tax in your social security income.
More info from Wikipedia, click here.
Consult your tax lawyer to confirm. Please verify.
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Tax for the rich!
I would like the rich to pay more, but not unfairly. They have only one vote each, so the politicians would give them a hard time. However, we do not want to kill the goose that lays the golden eggs. We do not to drive them out of the country. We
like to encourage them to invest with reasonable taxes for taking the chances.
(c) TonyP4 2011. Written in 7/20/10. Updated 7/20/11.
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Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
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The following are from a Group discussion on this topic from Yahoo1 Group
ReplyDelete--------
Kelvin Smith wrote:
Ever since the lower LT cap gain tax went into effect, the math works
so that your non-gain taxes are calculated first (with gains completely excluded), then the cap gain taxes are added on top.
It does affect the taxability of Social Security, though.
Tom trend wrote:
ReplyDeleteFor taxpayers in the 10% or 15% bracket, the tax rate on long-term capital gains and qualified dividends is zero.
Had a similar scenario during tax season and it had me stumped. Of course, it took the ProSystemFX tech support person all of about 10
seconds (not counting the half hour I was on hold).