Yesterday's WSJ article on a 0% cap gains rate since 2008

[SoCalOptionsWriter]

An article went through how many people qualify for this rate, and it was, to me, surprising; you can find the article online, if you are a subscriber.

What I was wondering, though, is, if you qualify, if most of your gains are Sec. 1256 (60% long-term and 40% short-term) does this rate apply? Apply to 60 percent of the gains? Or not at all?

 

[countryBoy641]

Yes, I have asked about that too.
I file Estimated tax returns every JAN 15.
i had seen that 0.00% Long term cap gains rate.
I asked the CPA who prepares my taxes.
His explanation: The "cap" for zero rate on LTCG is about $60,000 total taxable income (slightly more for Joint filers).
Who can live on $60K/year total income?
Nobody I know.
My guess, the heavily advertised 0.00% Cap Gains rate is a headline without a story.

 

[smallfil]

Yes, I have asked about that too.
I file Estimated tax returns every JAN 15.
i had seen that 0.00% Long term cap gains rate.
I asked the CPA who prepares my taxes.
His explanation: The "cap" for zero rate on LTCG is about $60,000 total taxable income (slightly more for Joint filers).
Who can live on $60K/year total income?
Nobody I know.
My guess, the heavily advertised 0.00% Cap Gains rate is a headline without a story.

The zero tax rate if I am not mistaken applies to the first $60,000 only then, anything over that, up to $493,000 gets taxed at 15%. Anything over $493,000 gets taxed at 20%. Not a bad deal actually. You still get to offset your losses against your gains before you are taxed which has the effect of recouping your trading losses to the extent of your gains. If you have a good paying job and relies only on a salary, you could be paying 28% or more in taxes. And if you can get trader status, you get to write off more expenses like the cost of a new laptop, internet, rent for the portion you use as office, etc. Consult a good tax accountant. It is worth paying for.

 

[ph1l]

What I was wondering, though, is, if you qualify, if most of your gains are Sec. 1256 (60% long-term and 40% short-term) does this rate apply? Apply to 60 percent of the gains? Or not at all?

The preferential tax rates apply to long-term capital gains (e.g., 60% of section 1256 income) and qualified dividends but not short-term gains.
https://www.wsj.com/amp/articles/capital-gains-taxes-how-you-can-grab-a-0-tax-rate-1fcfac39

The 0% rate applies to net long-term capital gains and most dividends. It doesn’t reduce rates on wages, taxable interest (as from bank accounts or bond funds), pensions, net short-term capital gains on investments held a year or less, taxable Social Security payments, IRA or 401(k) distributions or Roth IRA conversion income.

But if you earn too much from other income, the rate on the long-term gains would be higher.

Under the law, the income eligible for the 0% rate “stacks” on top of a filer’s other income. The more other income there is, as from a pension or Social Security, the less ability there is to use the 0% rate.

 

[countryBoy641]

The zero tax rate if I am not mistaken applies to the first $60,000 only then, anything over that, up to $493,000 gets taxed at 15%. Anything over $493,000 gets taxed at 20%. Not a bad deal actually.

I think tax preparers call that a "blended rate", less than 15% for many LTCG filers.
But my CPA didn't give me a blended rate (e.g. 12%).
He just said I was not eligible, based on total income.
He said 15% up to ~$500K LTCG.

I swing trade stocks and derivatives.
No interest in finding out more about the IRS.
i believe my CPA is skilled at least to the level of anybody he deals with at the IRS.
I'm good with that situation.

 

[SoCalOptionsWriter]

Ok, so, if I qualify, my Sec. 1256 taxation drops from a blended rate of 60%/40% to 0%/40%, about 15%? That's friggin' awesome? What administration do I thank? Can I go back and amend to 2008?

I'm still skeptical, though. My gains are short-term, which is what Sec. 1256 trades are, mostly, but taxed at a blended long/short term rate. So, do Sec. 1256 gains qualify for the 0% long-term treatment in the blend?

 

[countryBoy641]

Long Term Cap Gains (LTCG) means a holding period of 1 year + 1 day.
The Tax code is quite clear.

Further conversations need to be directed to your tax preparer.
He's the one who will present your case to the 1040 folks at the IRS.

 

[murray t turtle]

An article went through how many people qualify for this rate, and it was, to me, surprising; you can find the article online, if you are a subscriber.

What I was wondering, though, is, if you qualify, if most of your gains are Sec. 1256 (60% long-term and 40% short-term) does this rate apply? Apply to 60 percent of the gains? Or not at all?

%%
SOUNDS like 0.00% rate\
for Roth+ back door Roth accounts. But may want to check out latest tax code,
or IRS maga zine ,say by SAT or SUN, i seldom wait until the last minute
Average female CPA maybe tends to be a bit more conservative than a male CPA.
I usually ask for a cash receipt, except on gasoline/use IRS milage/subject to change.
WSJ also noted the TX banks that did not get bailed out;
bought out instead +[I noted one of those had WSJ adsLOL

 

[SoCalOptionsWriter]

Yeah, guys I wish I could post the link, but I figure most folks don't have a WSJ subscription. Not a back door Roth. Apparently only like 7% of taxpayers use it. I think the catch is you cant have too much earned income in addition to the cap gains. It's for folks who mostly have cap gains to live off of, for the time being.

 

[smallfil]

When in doubt, consult a qualified accountant. IRS seems to be in an audit mode nowadays. I have a friend who got audited although, his income was quite low and relied only on Social Security. It took 3 letters of back and forth before the IRS closed the file. Must be one of those 87,000 tax auditors they hired. Problem is they are in effect harassing average Americans who should not be audited in the first place. Those 87,000 auditors will find all sorts of problems with your tax return because they need to show their bosses that they are somehow doing their jobs when in fact, they are not. The filthy rich billionaires with tax loopholes up their asses never get audited, if at all.