Articles for Financial Advisors

The 0% Capital Gains Rate

The 0% Capital Gains Rate

The 0% long-term capital gains rate applies to individuals with taxable income of < $35,350 ($70,700 joint return); the dollar figures include capital gains. For example, a sole proprietor with taxable income of just $10,000 would not qualify for the 0% rate if his capital gains were $26,000.

There are a few important points to keep in mind about the 0% and 15% capital gains rates: [1] state tax rates likely apply (e.g., California taxes capital gains at the same rate it taxes other taxable income), [2] the capital gains may tax more of a recipient’s Social Security checks, [3] children subject to the “kiddie tax” do not get the 0% rate, and [4] the 0–15% capital gains rate has some exceptions resulting in higher taxes (e.g., collectibles, rare coins, art, gains from the sale of a qualified small business, and previously depreciated property that has now been sold). 

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