What advice would I want to give you to prepare for the remainder of tax season, this year? First, and foremost, if you haven’t already, I would tell you to get your tax information to a tax preparer ASAP. Recently, there have been many delays in the finalizing of forms by the government agencies, this year. As a result, there is going to be, if there isn’t already, a flood of returns once the forms are finalized. You may already be in the flood. Avoid it to the extent possible.
Today we are going to touch on three items; capital gains rates, federal tax rates and qualified dividends rates. I am choosing to discuss them in one topic because they are interrelated.
For the top ordinary tax rate, long-term capital gain maximum tax rates have gone from 15% in 2008 through 2012, to 20% for the top rate of 39.6% in 2013 and after. For example, for Married Filing Joint, a tax bracket of 39.6% is taxable income of $450,001 and over. Any long-term capital gains would be taxed at 20%, instead of 39.6%, a savings of 19.6%.
For ordinary tax rates of 25% to 35%, the long-term capital rates have remained the same at 15% for 2013 and after. For example, for a Single individual, tax brackets of 25% to 35% are taxable income of $36,251 to $400,000. Any long-term capital gains would be taxed at 15%, instead of 25% to 35%, a savings of 10% to 20%.
For ordinary tax rates of 10% or 15%, the long-term capital rates have remained the same at 0%. For example, for Married Filing Joint, tax brackets of 10% and 15% are taxable income of $0 to $72,500. Any long-term capital gains would not be taxed, a savings of 10% to 15%.
To figure your tax bracket, you can look up your taxable income by finding it on line 43 on page 2 of your form 1040. If not, you can call me on my Research Hotline and I will assist you.
Similar to capital gains, qualifying dividends are ordinary dividends that qualify equally for the 0%, 15%, or 20% maximum tax rate that pertains to net capital gains discussed above.
Marlen Rosales is a Certified Public Accountant, and Founder and CEO of Certified Accounting Services in Antioch. She can be reached at 978-4484 or firstname.lastname@example.org. Learn more about her on LinkedIn at www.linkedin/pub/marlen-c-rosales-cpa/1/305/7b3