How to Pay 0% on Capital Gain Tax Rates


Income taxes are never simple and the capital gain taxes are no different. Learn how to understand the new capital gain tax rates and even pay 0% in capital gain taxes.


Did you know that there is a zero percent capital gains rate? Well, I’m going to tell you how to pay zero taxes on your capital gains.

But first, what is a capital gain?

Well, that is when you have an asset outside of retirement, like a stock, a mutual fund, an index fund. Even a piece of real estate. You own it for a year. You sell it at a gain. You pay a special capital gains tax rate.

It’s cheaper than the regular tax rate. It’s normally 15% for most people. And 20%, if your income is high enough.

There is also a 3% Medicare Surtax at certain income levels. But most of you will pay 15% on your capital gain taxes.

But what about 0%? That’s the better rate, right? So, let’s talk about how to pay 0% taxes on your capital gains.

The first way to do it is if your income is low enough. So, if your married and your taxable income is below $76,000, about. Or single, below about $38,000. If you have any capital gains that make up that income, guess what? The federal government taxes you at absolutely zero. There’s no tax to pay. You may pay some for your state, but there’s nothing on federal taxes.

Now, for some of you it’s like, “Well, I make more than that. What can I do?” So there is a strategy called tax loss harvesting. And this is what I want you to think about. Some of you know about this but I’m going to tell you how to do this better.

So that is when you buy an asset, like a mutual fund or index fund and it goes down. Sometimes assets do go down before they go back up. So, when it goes down I want you to sell that asset when it’s lower. Not because you’re happy about losing money, but sell the asset.

Here is the key. Buy another asset that is similar so that you will receive the incline when it goes back up.

In the meantime, you have created a tax loss on your tax return.Let’s say you bought an asset at $20,000 then it’s $15,000. This loss here, that $5,000 loss, you can use that dollar-for-dollar against other capital gains.

And that is how you pay zero tax on that.

Now here is the thing I want you to realize. Your positions can go up and down throughout the year. Sometimes some of you look at this only in December and the market may be up at that point. Look at it year round. Anytime the market dips you want to be looking at tax loss harvesting opportunities. The best thing is you can net these losses against gains dollar-for-dollar.

If you have more losses than gains, the IRS says you can take another $3,000 against ordinary income, like salaries and pensions and so forth.

If you still have more losses, it carries over to the next year. And it carries over for the rest of your life.

So there is no downside to doing this – only upside.

Imagine this, in retirement, you’ve got this store of losses. You take money out of the non-retirement accounts.

You pay no taxes on it.

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• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, Inc. A Registered Investment Advisor.
• Pure Financial Advisors Inc. does not offer tax or legal advice. Consult with their tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.


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