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Planning to sell some investments this year? Experts say this is unlikely to impact your 2023 tax bill.
Here’s why: The IRS made dozens of inflation adjustments for 2023, including the long-term capital gains bracket, which applies to investments held for more than one year.
This means you may have more taxable income before investment income reaches the 15% or 20% brackets.
“It’s going to be very significant,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
Here’s Your Capital Gains Tax Bracket
With the higher standard deduction and income limits for capital gains, it’s more likely you’ll fall into the 0% bracket in 2023, Lucas said.
For 2023, you can qualify for a 0% long-term capital gains rate with taxable income of $44,625 or less for single filers and $89,250 or less for married couples filing jointly.
The rates use “taxable income,” which is calculated by subtracting the excess of the standard or itemized deduction from your adjusted gross income.
For example, if a married couple earns $100,000 together in 2023, their taxable income of $27,700 married filing jointly could easily fall below the $89,250 taxable income after subtracting the standard deduction.
By comparison, you’ll fall into the 0% long-term capital gains bracket for 2022 with taxable income of $41,675 or less for single filers and $83,350 or less for married couples filing jointly.
‘A really good tax-planning opportunity,’ says advisor
With taxable income below the threshold, you can Sell assets profitably without tax consequences, And for some investors, selling amid market volatility could be an opportunity to diversify, Lucas said.
“It’s out there, it’s available, and it’s a really good tax-planning opportunity,” he said.
whether you are taking advantage or tax loss harvesting“You really have to take control of your overall reportable picture,” said Jim Guarino, CFP, certified public accountant and managing director of Baker Newman Noyce in Woburn, Massachusetts, which uses losses to offset profits.
which involves guessing Year End Payments from Mutual Funds in taxable accounts — which many investors don’t expect in a down year — and could lead to a surprise tax bill, he said.
“Harvesting some additional losses can make a lot of sense if you’ve got that additional capital gain coming down the road,” Guarino said.
Of course, the decision depends on your taxable income including the payment, since you won’t have a taxable gain in the 0% capital gains bracket.