How higher-bracket taxpayers can take advantage of the 0% long-term capital gains rate.
The long-term capital gains rate is 0% for gain that would be taxed at 10% or 15% based on the taxpayer’s ordinary-income rate. If you have loved ones in the 0% bracket, you may be able to take advantage of it by transferring appreciated assets to them. The recipients can then sell the assets at no federal tax cost.
Before acting, make sure the recipients you’re considering won’t be subject to the “kiddie tax.” This tax applies to children under age 19 as well as to full-time students under age 24 unless the students provide more than half of their own support from earned income.
For children subject to the kiddie tax, any unearned income beyond $2,000 (for 2014) is taxed at their parents’ marginal rate rather than their own, likely lower, rate. So transferring appreciated assets to them will provide only minimal tax benefits.
It’s also important to consider any gift and generation-skipping transfer (GST) tax consequences. For more information on transfer taxes, the kiddie tax or capital gains planning, please Jim Komos at 216.831.7171 or jkomos@cp-advisors.com. We can help you find the strategies that will best achieve your goals.
Mr. Komos is the Partner-in-Charge of the firm’s Tax Department. He has experience in all facets of taxation for individuals, closely held businesses, their owners and key personnel. His clients are in a wide range of industries, including manufacturing, service, real estate, and construction.
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