Consider Recognizing Long-Term Capital Gains in Low Income Years

by Lewis A. Weinstein
Founder and CEO of GenerationTax

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TOP MBA TAX STRATEGIES

Consider a Roth IRA Conversion During Your Low Income Years

Determine if Your MBA Expenses Are Deductible on Your State Tax Return

Consider Withdrawing Funds From Your IRA–Penalty Free

Consider a Backdoor Roth IRA

Claiming The Proper Withholding Allowances

Recognizing long-term capital gains from stock sales in low income years is something you should seriously consider while in school. This is especially true for second year MBAs who likely only have minimal income from working during the summer.

For example, as can be seen from the table below, if you’re single you’ll pay zero capital gains tax if your total taxable income is no more than $39,375. You’ll pay 15 percent on capital gains if your taxable income is $39,376 to $434,550. If your taxable income is above that income level, the rate is 20 percent. In addition, capital gains may be subject to the net investment income tax (NIIT) of 3.8 percent if your income is above certain amounts. Please note that you should pay special attention to your total taxable income for the year to make sure the gains you recognize do not put you in the higher capital gains tax bracket, as this can cause all of your capital gains to be taxed at the higher rate.

2019 Long-Term Capital Gain Tax Brackets

Tax RateRate

               Single

Joint

Head of Household

0%

$0 to $39,375
$0 to $78,750
$0 to $52,750

15%

$39,376 to $434,550
$78,751 to $488,850
$52,751 to $461,700

20%

$434,551 and up
$488,851 and up
$461,701 and up