0% Long-term Capital Gains Rates? To Good to Be True?

Time is running out for the 2008 0% long-term capital gains rate. As a taxpayer your taxable income will need to remain below the 15% tax bracket (under ~$31,000 for single and ~$61,000 for married filing joint) and you need to have long-term (one year and one day or longer) gains before the end year.

The three primary challenges to be rewarded with the zero percent (0%) rate will be to actually have gains in stock positions, not have your gains be offset by prior year carried forward capital losses and to recognize the gain before Congress changes the law. A lot of gains over the past year(s) have now been erased with the declining asset prices (i.e. stock market, etc.) in additional with the lack of savings by Americans may make finding the assets to sell to trigger the gains challenging. The current financial bailout Congress is digesting may result in changes to the tax code which will be focused on increasing tax revenues.

The continued government deficit spending will more than likely result in future increases in long-term capital gains tax rates and income come tax rates. It may be best to trigger your long-term capital gains before any tax law change to ensure you remain in the 15% or under tax rate.

Remember, you can control the capital gains and losses you trigger by selling your stock. You should plan using the finalized tax rates and determine if triggering the gains are in your best interest.

Since tax planning can be more complicated than it sounds you should contract your tax advisor if you have any specific questions.