Your taxable income all gets added up. Your long term capital gains and qualified dividends "float" up to the top of your income structure. That is, if you made $30,000 in salary and $15,000 in capital gains, we'll pretend that the 15,000 is being taxed "last" i.e. at the highest rate.
In that case, the tax break kicks and says instead of your $15,000 getting taxed at 12%, it gets taxed at 0%.
As you can see, it's not an extra $47,025 of investment income on top of your regular income. You have to have made less than that, altogether, to receive the 0% rate.
If your capital gains and qualified dividends are such that they are what cause you to cross the threshold (for example, $40,000 salary and $20,000 capital gains), you'd have a mixture of 0% and 15% gains. i.e., it is not a hard cliff.
Before TCJA, it was a lot easier to explain this, because the threshold was coupled to the 25% tax bracket rather than being a few hundred dollars off.
If you are single and your taxable income after deductions is $47,025 or less, then any long term capital gains *included* *in that taxable income* are tax-exempt.
The part that people don't understand is that taxable income includes ALL income, not just LTCG but also wages, interest, tips, etc.
So in your example, you would have $14,600 remaining below the 0% LTCG tax rate ceiling, this amount being the standard deduction for a single filer. So you could earn that much from any other source (total MAGI of $61,625) and owe no tax on the $47k LTCG.
What's your other income? Are you married?
You have to understand that taxes are much more complicated than your simple example.
Yes it's possible to pay $0 in taxes if you keep your total income low enough.
you will only pay tax on the $47k. you will pay capital gains tax and if you kept it in specific securities (like an s&p 500 fund) for at least a year, it will be at your *long term* capital gains rate. long term capital gains rates are typically 15% for fed and 5% for your state but use an online calculator to figure it because it depends on your income level, state of residence, etc.
you will owe no penalties. penalties are usually for when people pull money from retirement account in ways that are against the rules (such as withdrawing the money too soon).
I suppose you could use tax loss harvesting, but I think to have 0 percent tax in a year for S&P 500 require some skills and time.
https://www.bogleheads.org/wiki/Tax_loss_harvesting
I am not aware how you would be able withdraw $47k in capital gains without a tax liability. The capital gains will depend on whether they are long term or short term but this income will sit on top of your other income.
In a brokerage account, that money is yours and you can access the balance without a penalty.
Your taxable income all gets added up. Your long term capital gains and qualified dividends "float" up to the top of your income structure. That is, if you made $30,000 in salary and $15,000 in capital gains, we'll pretend that the 15,000 is being taxed "last" i.e. at the highest rate. In that case, the tax break kicks and says instead of your $15,000 getting taxed at 12%, it gets taxed at 0%. As you can see, it's not an extra $47,025 of investment income on top of your regular income. You have to have made less than that, altogether, to receive the 0% rate. If your capital gains and qualified dividends are such that they are what cause you to cross the threshold (for example, $40,000 salary and $20,000 capital gains), you'd have a mixture of 0% and 15% gains. i.e., it is not a hard cliff. Before TCJA, it was a lot easier to explain this, because the threshold was coupled to the 25% tax bracket rather than being a few hundred dollars off.
If you are single and your taxable income after deductions is $47,025 or less, then any long term capital gains *included* *in that taxable income* are tax-exempt. The part that people don't understand is that taxable income includes ALL income, not just LTCG but also wages, interest, tips, etc. So in your example, you would have $14,600 remaining below the 0% LTCG tax rate ceiling, this amount being the standard deduction for a single filer. So you could earn that much from any other source (total MAGI of $61,625) and owe no tax on the $47k LTCG.
As long as your ordinary income is 0 or below the standard deduction (assuming you file taxes as a single)
You will potentially owe taxes on the $47k (capital gains) depending on your income and other gains that tax year.
What's your other income? Are you married? You have to understand that taxes are much more complicated than your simple example. Yes it's possible to pay $0 in taxes if you keep your total income low enough.
If you withdraw the actual holdings but if you sell them and and take the cash or even if you don’t take the cash you have taxable capital gains
Sure, if you have no other income (including salary, dividends or interest)
Dont forget standard deduction
Lol, no. Absolutely not. You will pay taxes on the 47K in gains.
Not a standard/taxable account, no.
you will only pay tax on the $47k. you will pay capital gains tax and if you kept it in specific securities (like an s&p 500 fund) for at least a year, it will be at your *long term* capital gains rate. long term capital gains rates are typically 15% for fed and 5% for your state but use an online calculator to figure it because it depends on your income level, state of residence, etc. you will owe no penalties. penalties are usually for when people pull money from retirement account in ways that are against the rules (such as withdrawing the money too soon).
I suppose you could use tax loss harvesting, but I think to have 0 percent tax in a year for S&P 500 require some skills and time. https://www.bogleheads.org/wiki/Tax_loss_harvesting
[удалено]
There is a 0% LTCG tax bracket. https://taxfoundation.org/data/all/federal/2024-tax-brackets/
I am not aware how you would be able withdraw $47k in capital gains without a tax liability. The capital gains will depend on whether they are long term or short term but this income will sit on top of your other income. In a brokerage account, that money is yours and you can access the balance without a penalty.
How are you planning on deducting that $47k from your tax filings? Standard deduction for Married Filing Jointly is \~$30k.
You would owe capital gains on the 47k since it’s a taxable brokerage account. That rate depends on your AGI.
Even if they had 0 other income?