Maximizing Your Capital Gains Tax Savings in 2025
Investors, rejoice! The IRS has recently announced inflation adjustments for 2025 that could allow you to shield more of your earnings from capital gains taxes. These adjustments include changes to long-term capital gains brackets, which apply to assets held for more than one year.
In 2025, there will be higher taxable income thresholds for the 0% capital gains bracket, creating a significant opportunity for tax planning. This means that investors can potentially sell more assets without triggering taxes, providing a golden opportunity to transform your taxable account into a tax-free account, at least temporarily.
Understanding the 0% Long-Term Capital Gains Rate
To qualify for the 0% long-term capital gains rate in 2025, single filers must have a taxable income of $48,350 or less, while married couples filing jointly are eligible with $96,700 or less. It’s essential to understand that taxable income is lower than your gross earnings. You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
Most taxpayers opt for the standard deduction, which adjusts for inflation. In 2025, the standard deduction will increase to $15,000 for single filers and $30,000 for married couples filing jointly.
Even if you earn well over $100,000, you could still fall within the 0% capital gains bracket in 2025 after considering the standard deduction. For example, a married couple earning $125,000 together could have a taxable income under $96,700 after subtracting the $30,000 standard deduction.
Strategies to Make the Most of Your Tax Savings
While the 0% capital gains bracket offers a unique opportunity for tax savings, it’s crucial to be mindful of your income levels to avoid surpassing the threshold. Any amount over the limit could result in a 15% tax on gains above the threshold.
Additionally, selling profitable assets could increase your taxable income and bump you above the 0% capital gains threshold. Before making any decisions, it’s recommended to run a full-year tax projection to understand how increased income could impact your tax situation.
At Extreme Investor Network, we’re dedicated to helping you make the most of your investments and navigate the ever-changing landscape of personal finance. Stay tuned for more tips and insights to empower you on your financial journey.