Friday, April 27, 2007

A Capital Gains Tax Break For Retirees

I have found several interesting tax breaks for retirees. These tax breaks can help one maximize income during retirement if one can control taxable income. This post will share the tax break for capital gains and qualified dividends.

Get a Capital Gain Tax Rate of 0%

If taxable income is $63,700 or less for 2008 to 2010, one may be eligible for an capital gains and qualified dividend federal tax rate of ZERO percent. That's correct NO Taxes.

Currently, the long term capital gains and qualified dividend tax rate is 5% for taxpayers in the 5% or 10% tax brackets. Based to the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) and extended by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), the 5% rate drops to 0% from 2008 to 2010. In 2011, these rates will sunset and revert to the pre-2001 rates. For more details, please read the article in The CPA Journal.

Capital Gains Tax Minimization for 2008 to 2010

If one has long capital gains, consider selling all or part of those assets, with capital gains profits up to the upper limit of the 15% tax bracket. Then keep one's total taxable income under this upper limit, via standard or itemized deductions and exceptions. By doing this, one will pay ZERO federal taxes on income.

For reference, here are the 2007 maximum limits for the 15% tax bracket:

Taxpayer Status

Maximum for 15% Tax Bracket



Married Filing Jointly
or Qualifying Widow(er)


Married Filing Separately


Head of Household


By the way, this works for anyone under the 15% tax bracket maximum income limits. One does not need to be a retiree:-)

For more on Reaping the Rewards , check back every Friday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC


Dimes said...

2011 seems like it will be a cruel year, tax-wise, if current changes aren't made permanent. The estate tax, capital gains tax, IRA contributions, and other things I can't think of are all going to go back in 2011.

Super Saver said...


Thanks for your comment.

Hopefully, people will take advantage of the tax breaks while they are available. I am assuming that a Democratic majority will not extend any of these.