VEJROSTEK TAX AND FINANCIAL
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For tax years 2008-2009-2010 many people will be able to take advantage of the 0% capital
tax rate.  Of course, that is assuming that congress doesn't change the rules again in the
meantime. Since we know that happens quite frequently, (there were 7 tax laws passed between
July 2007 and July 2008), it is best that people take advantage of this tax law as soon as and to
as great an extent as they can in both 2008 and 2009.

The way it works and how who it will work for is what follows next.

If you are married and filing jointly and your total taxable income is less than $83,000, or if you are
single and your total income is less than $41,300, then you will be able to take advantage of this
temporary tax break.  

If your money is positioned in such a way that you can control where your taxable income comes from
then if you are married filing jointly, you can literally bring in $83,000 of income tax free over the next
two or three years.  Now most people can't quite accomplish this task because too much of their income
comes from pensions, but most people should be able to bring in tens of thousands of capital gains in
tax free because of this law.

Allow me to show you how this works and then give you a few tips on how to best make it work for you.
If you are in the 15% tax bracket then your capital gains tax rate will be 0%.  For a couple filing jointly
the 15% tax bracket extends all the way to $65,100.  That number is for taxable income NOT total income.
Then we add to the $65,100 at minimum, the standard deduction of $10,900 plus the two personal
exemptions of $3,500 each ($7,000) thereby ending up with the $83,000. ($65,100 + $10,900 + $7,000).

So as an example if you have:
                                           $50,000    of other income (not counting the capital gains)
                              plus       $33,000   of capital gains
                                            $83,000   total income
                              less        $17,900   personal exemption and standard deduction
                                            $65,100   total taxable income (the top of the 15% tax bracket)
                              less        $33,000  the capital gains which will not be taxed at all
                                            $32,100  this is the only amount that you would have to pay tax on.

There are only 4 exceptions of capital gains that are not eligible for this tax treatment and they are:
                 1. corporations    cannot take advantage of this rule it is for idividuals only.
                 2. sales of collectibles
                 3. qualified small business stock
                 4. recaptured depreciation  (from rental properties or other "listed" property

So now comes the creative part. There are no other restrictions, so everybody should be doing everything
they can to take maximum advantage of this huge tax break. There is nothing in the rules that says you
can't sell an asset such as a stock or mutual fund, take the tax free gain and then re-buy the exact same
investment back the very next day.  That way you are basically getting a double tax break.  For one you
get to capture your gain tax free, but just as importantly, you get to now reset your basis in that investment.
So the next time you sell that investment you will have a lot less gain that is taxed.

There are also ways that you can maximize the amount of the gain that you can bring in tax free, such as:
If you normally take more than your required minimum distribution, you could take just the minimum for a couple
of years allowing for more capital gain income.  Also you could maximize deductions to get over the standard
deduction or do inevitable repairs or upgrades to a rental unit or if you own a small business you can buy
equipment now that you know will be needing in the near future.

Of course the other way you can reduce taxable income is to put some of your assets into tax deferred instruments
thereby reducing your current income.  As luck would have it one of the company's that we represent has just
introduced a 3 year annuity that is paying a guaranteed 5% for the 3 years and then you can cash it out and
reinvest it back to where it was, thereby allowing you to take advantage of this tax law for the next 3 years.  The bottom
line is if you are sitting on gains in property, rental properties, 2nd homes, stocks, bonds or mutual funds, you need
to be working with an expert to make sure you take maximum advantage of this tax break.

If you have questions or need help figuring how you can best take advantage of this tax law change then please take
advantage of my 1 hour free consultation.  You can contact me through the contact us page on this website or feel
free to just give us a call.
0% Capital Gains Tax Rate