Stock Selling Strategy in Low Income Years

​The current stock market rally presents opportunities for tax-gain harvesting. See below for details on this strategy…

​If your stocks have grown in value with recent runup in the stock market, and you’re in a lower income year, now may be a great time to sell some of these gainers.
 
This approach involves selling stock with large built-in gains while you’re in the 0% IRS long-term capital gains bracket.
 
Long-term capital gains are not taxed by the IRS on taxable incomes below $47,025 for single filers and $94,050 for married filers. These figures are net of your standard/itemized deductions. Individual states vary in their handling of capital gains.
 
For example, a single filer with $35,000 in earned income from W2’s and $25,000 in net capital gains from stock sales would have $0 taxes with the IRS from the capital gains income. That’s because the $60,000 income would be reduced by at least the $14,600 standard deduction, which puts taxable income at $45,600…below the threshold for 0% capital gains tax rates.
 
Then if you like the stock, you can always use your proceeds to buy back in and at the higher price, which essentially resets your cost basis for a future sale!
 
Each situation must be assessed individually to determine if this strategy it a good fit.