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Capital Gain and Dividend Tax Relief for some Retirees

Posted on April 14, 2012 by bobrichards

One particular major benefit for tax payers in the lowest 2 tax brackets is the removal of both the long-term capital gains tax and qualified dividend tax through 2012. This tax break pertains to the 10% and 15% tax brackets in which many retirees find themselves.

Long term capital gains tax - to which the tax break pertains - is applicable to any investment you are selling that you've held for at least one year. The amount taxed is the difference between the selling rate as well as your basis in the item (i.e. what you paid). Short-term capital gains tax rate will be the same as your normal revenue tax rate; it applies to items your promoting after less than a year holding period.

Regarding the table below - based on 2012 tax prices - you can have a rather healthy income and still stay in the lowest 2 tax brackets.

So, based on the 2012 tax rate schedule, anybody filing single having a gross revenue of $45,one hundred or less will qualify for the 0% capital gains and qualified dividend tax rate while these declaring married filing jointly (MFJ) can have around $90,000 gross income. This tax break is consequently generously available.

Tax
Bracket
Filing
Status
Highest Taxable Income Personal
Exemption
Standard
Deduction
Gross  Income
Equal to or less than 15% bracket MFJ $70,700 $7,400 $11,900 $90,000
Equal to or less than 15% bracket Single $35,350 $3,800 $5,950 $45,100

 

Anyone who has had a substantial rise in their financial commitment through the years would usually be subject to long-term capital profits tax. To consider benefit of the final year of the money profits tax relief, he should offer the investment. If he's still thinking about possessing on to it, then he can buy it again. The benefit of this tax strategy would be to re-established his place with an increased tax basis - to the investment's present value. So in the future when capital profits tax is reapplied, he'll have a much higher basis in his expense to reduce long term gains taxes.

You Pay More Taxes Than Necessary

And we guarantee your CPA has never told you The problem with paying taxes is that most people overpay. So if you are concerned about having enough in retirement, you must stop overpaying taxes. I know you think your CPA takes care of this for you. WRONG. I AM a CPA (retired) and I can tell you that 90% of CPAs do nothing more than enter your information into the little boxes on the tax return but NEVER tell you how to pay less next year. Why? Many of them simply do not know what we can show you. In ten minutes.
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Filed Under: Tax Savings

About bobrichards

Bob Richards
Editor | Involved in Various Marketing Positions within the Financial Services Industry

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