Hidden Value is a new column in ThinkAdvisor where Joe Elsasser, CFP®, answers common questions with insights advisors and their clients may not have considered. This week he discusses the common belief that the tax rate is 15% on capital gains, and how the tiered bracket structure of qualified dividends and long-term capital gains can actually create some unique opportunities.
Here's an excerpt:
"The tiered structure of the capital gains brackets creates unique opportunities to take advantage of the zero percent rate. For instance, for a married couple in 2018, the standard deduction is $24,000 plus an additional $2,600 if both are over 65 years old or blind. That means a married couple filing jointly, both over 65, could actually have $103,800 of capital gains and pay no federal income tax at all!"
For clients who are recently retired and have a choice from which account they should be spending, there are often opportunities to take advantage of the zero percent capital gains rate.
Read the article in its entirety.