This Could Be Your Last Shot to Grab Investing Gains Totally Tax-Free

Tax helpNo one wants to pay more in taxes than they should. In order to keep your tax bill as low as you can, it pays to stay on the lookout for opportunities to keep your tax rates as low as possible.

For years, some investors have been able to earn certain types of investment income without paying any taxes at all. But with the coming fiscal cliff looming, a valuable tax break could disappear entirely.
How Low Can You Go? All the Way to Zero

For about a decade, all investors have enjoyed lower rates on qualified dividends and long-term capital gains -- the profit you make when you sell an investment for more than you paid for it. When lawmakers passed the Bush tax cuts in 2003, they set the dividend rate and the long-term capital gains rate at the same level: 15%. The move was an especially huge cut for dividends.

But what many people don't realize is that an even lower rate applies for people who are in the lowest two tax brackets. Under current law, joint filers with taxable income up to $70,700 and single filers with income up to $35,350 pay nothing in taxes on qualified dividends and long-term capital gains.

A Limited Tax Break
If you're in those income brackets, though, you can't get infinite tax-free gains. The 0% rate applies only up to the top end of the 15% tax bracket. Beyond that, you'll pay the standard maximum rate of 15%.

Sponsored Links
But for many taxpayers, that leaves a lot of room to pull in tax-free gains. If you file jointly and have taxable income of $60,000, for instance, you could take up to $10,700 in additional capital gains without paying a cent of tax. That can add up to huge tax savings; if you chose to take those gains in a year when the 0% rate doesn't apply, those gains could cost you more than $1,600 in taxes -- or more, if scheduled tax increases take effect.

Unfortunately, 2012 may be the last year that the 0% tax rate will exist. Unless lawmakers make changes, both capital gains and dividend rates will rise dramatically in 2013, with dividends returning to their old treatment as ordinary income. Capital gains rates will rise to 20%. So if you have room to take tax-free gains by selling profitable investments, don't wait: Get it done before the year ends.


Motley Fool contributor Dan Caplinger used the 0% rate to its fullest back when he was eligible for it.

Should I Include a Dependent's Income on My Tax Return?

It may be easier and less expensive to include dependents' income on your tax return rather than have them file their own return—in certain circumstances.

Read More

Brought to you by TurboTax.com

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as an itemized deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

Read More

Brought to you by TurboTax.com

Tax Tips After January 1, 2019

TurboTax gives you ten tax saving tips for the new year. Find strategies to lower taxes, save money when preparing your tax return, and avoid tax penalties.

Read More

Brought to you by TurboTax.com

Should You and Your Spouse File Taxes Jointly or Separately?

Married couples have the option to file jointly or separately on their federal income tax returns. The IRS strongly encourages most couples to file joint tax returns by extending several tax breaks to those who file together. In the vast majority of cases, it's best for married couples to file jointly, but there may be a few instances when it's better to submit separate returns.

Read More

Brought to you by TurboTax.com
Read Full Story