Always consult your tax preparer for tax-saving ideas before you sell property at substantial gains.
The Tax Cut and Jobs Act which passed at the beginning of the Trump Administration expanded the brackets for capital gains rates and indexed them for inflation.
This is good news for taxpayers in all income levels.
The laws are written so if you have capital gains you will, in almost every circumstance, save money over your normal personal income tax bracket.
Qualified dividends are dividends you receive from your stock market portfolio and long-term capital gains are gains from the sale of stocks, real estate, and most all other non-depreciated property held for more than 1 year.
You may also have capital gains from the sale of a business on an installment sale.
The current tax rates on long-term capital gains and qualified dividends is:
For joint returns and taxable income under $77,200 . . . . . . zero
For joint returns and taxable income under $479,000 . . . . . .15%
For joint returns and taxable income over $479,000 . . . . . . .20%
The above income thresholds are based on Taxable Income. Taxable Income is determined after you deduct itemized deductions so taxable income is always going to be a lower figure than your gross income. Therefore, more taxpayers will benefit from the lower capital gain rates.
High-income taxpayers – for joint filers with both modified adjusted gross income and net investment income over $250,000, a 3.8 additional tax is owed. Therefore the brackets for them go from 15% to 18.8 and 20% to 23.8% respectively.
If you are a high-income taxpayer you can avoid the 18.8% capital gains bracket or the 23.8% bracket by gifting the capital gain items before you sell them to children or grandchildren thereby going from paying 23.8% in taxes to zero.