You read that correctly, individuals in the lowest two brackets (the 10% and 15%) tax brackets will pay zero taxes on long-term capital gains triggered in 2008-2010. According to 2008 tax tables, included in The Audit Angel 2008, the 15% tax bracket encompasses single filers with taxable income up to $32,550 and married filing joint filers up to $65,100.  Remember taxable income is your total income minus deductions and exemptions. For example, a single individual who claims the standard deduction could have up to $41,500 in adjusted gross income in 2008. Example: $41,500-$5,450(standard deduction) – $3,500 (1 exemption) and still fall within the 15% tax bracket.  Obviously, your income could be even higher and fall into the 15% tax bracket with higher itemized deductions, married filing status, and dependents. Some articles have been written suggesting moving appreciated assets by way of gifting to low income children who could then sell and owe zero tax. Beware of the kiddie tax, which is a tax on young children’s investment income, including long-term capital gains and is equivalent to the parent’s marginal federal rate and could be as high as 33%.  To find more information on the kiddie tax, go to “Kiddie Tax” under the Tax Answers and Articles link on the Bergerson Tax Home page.

Even if you do not fall into that 15% tax bracket all is not lost as the maximum long-term capital gains rates remain at 15% for 2008.  In the past, these rates have been taxed as ordinary income, which meant at 25%, 28%, 33%, or even 35%.