If you’re planning to sell investments or rebalance brokerage assets next year, it’s possible you won’t trigger a tax bill for 2024.
The IRS on Thursday released dozens of inflation adjustments for 2024, including increases in income tax brackets, standard deductions and income thresholds for capital gains.
For 2024, there are higher thresholds for the 0%, 15% and 20% long-term capital gains brackets, applying to assets owned for more than one year.
“It’s great from a tax planning perspective,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida. “There’s definitely an opportunity to take some gains next year.”
If you’re in the 0% capital gains bracket, you can sell long-term assets or rebalance your taxable portfolio without adding to your tax liability, he said.
How to calculate your capital gains tax bracket
You’re more likely to fall into the 0% capital gains bracket in 2024 with higher standard deductions and capital gains income thresholds.
“A lot of people don’t realize,” Lucas said.
For 2024, you may qualify for the 0% long-term capital gains rate with taxable income of $47,025 or less for single filers and $94,050 or less for married couples filing jointly.
The standard deduction will rise to $29,200 in 2024 for married couples filing jointly, an increase from $27,700 in 2023, and single filers may claim $14,600, up from $13,850. The standard deduction is even higher if you’re at least age 65 or blind.
However, many investors don’t know that capital gains brackets use “taxable income,” which is calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
“It’s really quite a bit of capital gains you can receive without paying any tax,” said certified public accountant Tom Wheelwright, CEO of WealthAbility.
For example, if a married couple earns $125,000 together in 2024, their taxable income may fall below $94,050 after they subtract the $29,200 standard deduction for married couples filing jointly.
Who may fall into the 0% capital gains bracket
There are several scenarios where higher earners may unknowingly fall into the 0% capital gains bracket for 2024, experts say.
For example, retirees who haven’t started collecting Social Security income or required minimum distributions “absolutely should be looking at this,” Wheelwright said, noting that $94,050 of taxable income is a “pretty big number.”
You may also fall into the 0% capital gains bracket if you experienced a job loss or lower revenue as a business owner.
