#2018 FEDERAL CAPITAL GAINS TAX BRACKETS HOW TO#

(For more charity strategies, see Charity In The Age Of Trump: How To Maximize Impact And Minimize Taxes.)īuy And Hold. He’ll get the income tax deduction for the fair market value of the stock and have no capital gains tax hit. So instead, he transferred $50,000 of appreciated securities into a donor-advised fund. Wyman just helped a soon-to-be-retired client who used to give $5,000 a year to charity, but wouldn’t get the income tax deduction for a $5,000 gift in 2018. One solution to get both breaks is to put a multiple of your typical annual gifts into a donor-advised fund (that counts as a charitable gift, but you grant out the money later). But giving appreciated stock to charity still works to avoid capital gains tax. Under the tax overhaul, 61% fewer taxpayers will claim itemized deductions, including the charitable deduction. Watch out: If the child is under 24, the new tax law applies trusts tax rates to “kiddies” (see The Kiddie Tax Grows Up). “It’s just a way to make your dollars go longer,” he says. A 70-something couple use it to leverage gifts to their 50-something kids. Wyman has grandparents using this technique to help their granddaughter through medical school. That could mean the family saves a 23.8% tax bill. If you give highly appreciated stock to your child or parent, she takes your low basis, but when she sells it-if she’s in a lower bracket-her capital gains rate is 0%.

You can make annual exclusion gifts of up to $15,000 per individual each year. If your losses are greater than your gains, you can deduct up to $3,000 a year against your ordinary income, and carry over any excess to future years.įamily Gifts. Consider selling losers in your portfolio to offset any gains. Just watch out that you’re not bumping up against the 3.8% NIIT, warns Bigge. You can sell winning investments to use up the 0% and/or 15% capital gains brackets and rebuy the same stock to reset the basis. “We try to use as much of the zero-percent bracket as we can,” Bigge says. He’ll owe zero percent on half of that and 15% on half, for an effective rate of 7.5%.

In an abnormally low-income tax bracket because his pension and deferred compensation haven’t started kicking in, he’s selling $350,000 of stock with $120,000 of built-in gain, recognizing $40,000 of gain a year. What does this mean in practice? Steve Bigge, a CPA in Green Bay, Wisconsin, has a recent retiree client, with a concentrated position of stock he wants to get out of because he’s getting bearish. Even worse, the new tax law limits the state and local tax deduction, so the state bite becomes more taxing. “It’s a significant number,” says Morgan. In California with its top 13.3% rate, you can get a 37.1% total capital gains tax bite. So, in practical terms, there’s also an 18.8% rate, and the top rate is really 23.8%.ĭon’t forget state capital gains taxes in your calculations. Next, there’s a 15% rate and at over $479,000 for a couple, there’s a top 20% capital gains tax rate, but watch out because an additional 3.8% net investment income tax kicks in for couples with $250,000 of income. For 2018, a couple can have up to $77,200 in taxable income (add on the $24,000 standard deduction, and it’s over $100,000) to snag the zero-percent capital gains rate. The capital gains tax rates are the same under the new tax law, just now they have their own brackets. The planning for most taxpayers lies in capturing the zero-percent rate. The Economic Innovation Group has a map here. The goal is to get capital to struggling low-income census tracts, but the Brookings Institution explains here how already gentrifying neighborhoods qualify. The IRS just announced the final round of Opportunity Zones and has published FAQ.

Investors in “opportunity zones” (via a fund that directs investments in real estate or companies located there) get temporary deferral of accumulated capital gains, up to a 15% basis step-up on capital gains invested, and here’s the kicker-a capital gains bill of zero on new gains for investments held 10 years.

2018 federal capital gains tax brackets