New legislation could impact your investments.
Is that a misprint? No. It’s not well known, but beginning in 2008 and through 2010, taxpayers in the lowest two federal tax brackets may use a zero percent rate on qualified dividends and long-term capital gains. Yo u are eligible for this tax break if your adjusted gross income is less than $32,550 for single tax payers or $65,100 for married taxpayers filing jointly.
Many retired couples with comfortable incomes, but who draw a significant part of their income from Social Security and tax exempt interest, may be well below the $65,100 threshold. This presents an opportunity to cash out some of those highly appreciated stock positions or sell an appreciated piece of property without paying a sizable chunk in taxes. In an alternate scenario, children of these retired couples could transfer highly appreciated assets to their parents, while retaining the same cost basis and holding period. The parents could cash the asset out at zero percent capital gain; this strategy could be ideal in the case of children assisting elderly parents.