Here's how to pay 0% capital gains taxes with a six-figure income

It's earthy to fixate connected portfolio losses, particularly with the S&P 500 down much than 20% for the year.

But you whitethorn inactive person gains aft years of growth, and the profits could suffice for a 0% taxation rate, depending connected your earnings.

The thresholds whitethorn beryllium higher than you expect — adjacent six figures of associated income for a joined couple, fiscal experts say.

Many investors deliberation of 2 rates for semipermanent superior gains, 15% and 20%, explained Dale Brown, committee seat astatine Salem Investment Counselors successful Winston-Salem, North Carolina, which ranked sixth connected CNBC's 2022 FA 100 list.

But determination are really 4 rates — 0%, 15%, 20% and 23.8%, with the 3.8% surcharge for higher earners. "I've had clients with debased six-figure incomes who paid nary taxes," Brown said. 

Here's how: The rates usage "taxable income," calculated by subtracting the greater of the modular oregon itemized deductions from your adjusted gross income, which are net minus alleged "above-the-line" deductions.

For 2022, you whitethorn suffice for the 0% semipermanent superior gains complaint with taxable income of $41,675 oregon little for azygous filers and $83,350 oregon little for joined couples filing jointly.

While a mates making $100,000 whitethorn presume they don't suffice for the 0% semipermanent superior gains bracket, Brown said investors request to crunch the numbers.

For example, let's accidental a retired mates has $30,000 successful tax-exempt interest, $25,000 of regular income and $75,000 successful semipermanent superior gains and dividends. Their gross income is $100,000 since it doesn't see the tax-exempt interest. 

After subtracting the modular deduction of $27,000, they're near with $73,000 successful taxable income, falling wrong the 0% semipermanent superior gains taxation bracket for 2022. 

Even if a couple's taxable income is supra $83,350, portion of their net whitethorn inactive autumn into the 0% semipermanent superior gains bracket, Brown said.

Let's accidental the aforesaid retired mates had $30,000 successful tax-exempt interest, $25,000 of regular income and $100,000 successful semipermanent superior gains and dividends.

In this case, their gross income is $125,000 and taxable income is $98,000. Since the $27,000 modular deduction exceeds the $25,000 of regular income, the $98,000 is wholly semipermanent superior gains and dividends.

This means $83,350 is taxed astatine the 0% complaint and the mates owes 15% semipermanent superior gains taxes connected the remaining $14,650.

"That's the payment of the 0% bracket," Brown said.

When the banal marketplace is down, galore investors absorption connected tax-loss harvesting, oregon utilizing losses to offset different profits.

But you whitethorn besides research harvesting gains if your assets are inactive up from erstwhile years, said Cory Robinson, vice president and portfolio manager astatine Tom Johnson Investment Management successful Oklahoma City, which ranked No. 30 connected the FA 100 list.

"The payment is determination are zero taxes, whether it's dividends oregon superior gains" arsenic agelong arsenic you're beneath the taxable income threshold, helium said.

For investors successful the 0% bracket, it's imaginable there's a accidental to trim taxes connected aboriginal profits.

Since taxes are based connected the quality betwixt the worth upon merchantability and archetypal acquisition price, you tin merchantability the profitable plus and repurchase to summation the acquisition price.

"That's the quality of taking gains: You tin instantly reinvest," Robinson said, explaining however investors don't request to interest astir the alleged wash merchantability rule.

Although the lavation merchantability regularisation blocks harvested losses if you bargain a "substantially identical" plus wrong the 30-day model earlier oregon aft the sale, the aforesaid regularisation doesn't use to gains, helium said.

Whether you're selling assets for income oregon leveraging a semipermanent taxation strategy, determination whitethorn beryllium opportunities to harvest gains during lower-earning years, Brown said.

For example, determination whitethorn beryllium an income spread if you discontinue but don't instantly person Social Security, a pension oregon withdrawals from pretax status accounts, helium said.

You whitethorn besides person little taxable income during a twelvemonth with a impermanent occupation loss, Brown said.

"The astir important happening is the timing," Robinson added, explaining however it's captious to estimation your taxable income earlier attempting to harvest gains.