After reviewing the various phase-outs of itemized deductions and personal exemptions based upon gross income plus the implementation of the new 3.8% investment surtax, for 2013 there now at least 10 different possbile maximum long-term capital gains and qualifying dividends tax rates. The rates range from zero for that portion in the 10-15% tax bracket up to almost 25% for those taxpayers with income in excess of the 20% maximum capital gains threshold amount (currently $400,000 – single and $450,000 – married filing joint).
We worked up a quick chart showing what the maximum rates might be assuming various levels of gross income and taxable income. It is extremely difficult to get this chart exactly right since part of the tax is based on adjusted gross income and part is based on taxable income. It is designed to give you an idea what your actual capital gains rate may be for certain levels of income. Unlike most tax planning based upon taxable income estimates where we know the rate, for capital gains taxes, you most likely will not know your exact rate until you file your return.
Also, if AMT applies in your situation, the rates associated with the phaseout of personal exemptions may not apply and part of the phase-out of itemized deductions may not apply also.
Unlike 2012 where we had two maximim capital gains rates (zero and 15%), for 2013 it can be at least 10.
The above link provides an example of what the maximum capital gains tax rates would look like for a married couple with two children in 2013. You will need to click the link twice to get it to come up.
Paul Neiffer, CPA