Question

Magnum is single. He has some stock that he bought for $5.00 many years ago which is now worth $30,000, and he would like to sell it. He has no other capital gains or losses. It is Nov 30, 2018. Magnum will have taxable income of $150,000 in 2018 (before this capital gain). He anticipates having taxable income of $450,000 (before this capital gain) and no other possible capital gains or losses in 2019. What might be a good end year tax planning strategy for Magnum?

Answer 1

Long term capital gain tax rate is 15%, but it can be 0% if the taxable income fall under 10% or 15% ordinary income tax bracket but it can be 20% if the taxable income exceeds the threshold limit for 39.6% ordinary tax bracket i.e. $418,400 for single.

In 2019, Magnum taxable income will increase the threshold limit of $418,400 for 39.6% tax bracket and thus capital gain tax rate will be 20%, and he has to pay higher taxes, but if he sell in 2018, his taxable income is $150000 and thus his capital gain tax rate will be 15% and he will be benefited if he sell the investment in 2018.