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With the prospect of new lower individual tax rates on the horizon for 2018, the average taxpayer or business owner should generally accelerate deductions to 2017 and delay income until 2018. Often overlooked in the planning arena are the low capital gains rates experienced by many Americans.
2017 Capital Gain Rates (01/2013 Tax Act)
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If net capital gain is from:
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Then maximum capital gains rate is:
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Collectibles
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28%*
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Gain on Qualified Small Business Stock Equal to the Section 1202 Exclusion
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28%*
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Un-recaptured Section 1250 Gain
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25%*
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Rate when taxpayer is in 39.6% personal bracket
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20%*
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Other gain & qualified dividends when the regular tax rate is higher than 15%
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15%*
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Other gain & qualified dividends when the regular tax rate is 15% or lower (Single <$37,650, MFJ <$75,300 taxable after exemptions)
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0%
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When an individual is in the 15% or lower individual tax bracket in 2017, their capital gains rate is 0%, and if the capital gain is what causes their ordinary income tax bracket to go higher than 15%, only the excess capital gains are taxed at 15%.
With all of that in mind, in layman’s terms if an individual’s taxable income is less than the amounts below based on their filing status, their capital gains rate for 2017 is 0%.
Capital Gains Planning-2017 Amounts
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Single
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Married-Joint
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Married Separate
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Head of Household (+1 child)
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Income at the top of the 15% bracket
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$37,950
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$75,900
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$37,950
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$50,800
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Standard Deduction based on filing status
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+6,350
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+12,700
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+6,350
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+9,350
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Personal exemptions based on filing status no children
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+4,050
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+8,100
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+4,050
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+8,100
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Maximum taxable income (without itemizing) for 0% capital gains rate
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=$48,350
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=$96,700
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=$48,350
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=$68,250
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Client Worksheet for Capital Gains Planning
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Client Name: Filing Status: 2017
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Filing status bracket limit
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Filing status standard deduction
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Additional Itemized deductions
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# personal exemptions times $4,000
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Maximum 0% capital gains taxable income limit
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Less estimated taxable income
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Equals amount of capital gains to recognize this year
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