So key is 1. Personal brokerage account 2. Capital gains + income + dividends have to be less than 47,025 for single and 3. Must own stocks for 2 years to have capital zero percent gains to act like Roth so theoretically you could strategically take small amounts of like 5k from personal brokerage account like a roth and as long as under 47,025 it would act like Roth if i understand correctly.
One thing you could have mentioned is that even with 'Tax Gain Harvesting' you still have to pay STATE income taxes even if your Federal taxes are $0. For example - California does not distinguish between Short-Term and Long-Term capital gains so every dollar of profit is taxed at ordinary rate. So in the example on the video a CA resident would still be on the hook for 8% in state income tax.
"Tax Gain Harvesting' you still have to pay STATE income taxes even if your Federal taxes are $0." Just as you think he forgot to mention state income taxes, you also forgot to mention that some states don't have an income tax so there you go. This is why people don't cover the state income taxes in videos most of the time. There are 50 states so how can they even address it? make a 2 hour video for a 15 minute topic?
@@mjs28s You are right, however for completeness sake, if one line can be said about some states requiring income taxes to be paid on these gains then it will keep people from surprises at tax time. For example, if you live in CA and you want to take full advantage of Tax Gain Harvesting then your state income tax will be 8% (MFJ) and Federal 12% (MFJ), so the saving is really only 4%.
Good stuff, Ari. A lot of us have been dividend reinvesting for years and have large individual positions. I think this could be useful to help us slowly diversify out of these concentrated positions.
In the example of the person getting $300k in gains from selling her house (so she has $50k after the exclusion) she owes no taxes, but what happens to her healthcare? If she has been getting low cost healthcare due to her low income, does the sale of her house show as $400k of MAGI? She would no longer qualify for the healthcare plan she enrolled in. Does her healthcare subsidy go away? Does she have to payback any subsidy that she received earlier in the year?
I am not an expert so take this with a grain of salt but I think for that year they would have to simply pay the difference of the ACA premium credit. If they’re really concerned with going over the limit for just that one year and losing the $6k, I imagine they could to a strategic cash out refinance and then sell. But what scenario would realistically would this happen in?
When calculating the gain obtained from selling a house, what expenses can be considered in the calculation? Others have commented that you can subtract the cost of home improvements, i.e., if you spent $100K to put an addition on the house, that $100K can be deducted from the overall gain to lower your tax exposure. What about mortgage interest - can that be deducted? Property taxes? Anything else we should look out for?
MFJ you pay zero taxes on less than 94k ? ordinary income? Im missing something here. You have to add ordinary income with capital gain income I thought?
$94k is for a married couple. Half that for single. His example is also if you only get your income from capital gains. If you also worked you would pay more taxes in the capital gains.
If I am making Roth conversions and use my brokerage account to pay for the taxes on those conversions, I need convert less than 47k as a single? person to pay 0% in capital gains?
So if we made combined taxable income just below $94,050 (from our jobs) and file taxes as MFJ, and sold stocks with realized gains (let’s say $100k) would we pay taxes on those gains ?
The 94k in wages counts on both the ordinary income and capital gains schedules, so the wages push your stock sales into the next bracket on the capital gains schedule. Your capital gains on the $100k would then be taxed at 15%.
Question: when you say "if her income is under $47k she won't have to pay capital gains taxes" does this mean that the "income" calculation is based on earned income (excluding the cap gains)? For example, if her income consists solely of Social Security in the amount of $40k, and she takes the standard deduction, she has income of about $26k. But if she sold Apple stock and captured $100,000 of gains, is she still being taxed at 0% on all $100k? Said differently, does the "income" figure exclude capital gains, or is the $47k/$94k threshold inclusive of cap gains?
Income of $26K is taxed 1st, capitol gains is taxed "ON TOP" of the ordinary income. so they would be taxed on $126K. 1ST 26K TAXED at [10%($23,200) +12%($2,800)=$26,000] the capitol gains starts at 26,000 and stacked on top, so $94,050 [capitol gain chart] of the 126K is taxed at 0% (94,050 - 26,000 = 68,050) THAT $68,050 is subject to the 0% capitol gain tax the remaining $31,950 is taxed at the 15% capitol gain tax (100,000 CG - 68,050 = 31,950) Hope that helps you and does not make it more confusing.
To be kinda blunt, I am giving up on investing in stocks... I put between 2000 to 3000 a month and it's nothing but down down.... Sooooo frustrating and I only invest in boring big companies. What can I realy do?
You're right, the value of advisors cannot be overlooked. I used to handle investing myself but faced some losses 2020, thus consulted an advisor. As of today, I'm just very close to gains of $13Million after subsequent tax deductions.
@@AlbertiniCaputi This is Revolutionary! mind sharing info of this professional guiding you please? how to put my excess money to work to upgrade my social class has been my daily thought, thus the search for a reputable advisor
Can't divulge much, I take guidance from a Pennsylvania-based advisor 'Karen Lynne Chess' and most likely, the internet is where to find her basic info, simply do your research. Thank me later.
thanks for the lead, just searched Karen by her full name on the web, easily spotted her consulting page and was able to contact her, I really enjoyed starting up business with her. she is impeccable!
I have a regular taxable brokerage account and will have massive long term capital gains tax if I sell anything. Does it even make sense to sell some, pay tax, then buy in a Roth at only $8k per year?
Ari, after watching a video made by James in 2023, he made available for download the spreadsheet you referenced in your video (only it was last years version). Can you make the current 2024 spreadsheet available for download?
I like to take profits when stocks are up, which allows me to sell a smaller number of shares a prevent these capital gains. I have no mortgage and my tax burden is not huge. Give it a try.
While the content of this video is technically correct, it is misleading and lead viewers into believing that the first $94,050 (if Married Filing Jointly, or MFJ) is always tax free. For the vast majority, this is not always the case. - You HAVE to account for Ordinary income, dividends, Short Term cap gains, pensions, Annuities, and any other taxable gains or incomes. We'll call this reference AA. - For simplicity, if we use the formula, for 2024, MFJ: AA minus Standard Deductions (or itemized deductions) = X. * If X is less than $94,500, THEN you can sell your Long Term (LT) Capital Gains up to on that difference and pay no LT taxes * The reason is AA is taxed FIRST, then LT is taxed on TOP of that. In other words, if AA is $94,500 or greater, there IS NO BENEFIT for LT tax gain harvesting.
After 1000 hrs of watching videos, first time hearing it, love it!
So key is 1. Personal brokerage account 2. Capital gains + income + dividends have to be less than 47,025 for single and 3. Must own stocks for 2 years to have capital zero percent gains to act like Roth so theoretically you could strategically take small amounts of like 5k from personal brokerage account like a roth and as long as under 47,025 it would act like Roth if i understand correctly.
One thing you could have mentioned is that even with 'Tax Gain Harvesting' you still have to pay STATE income taxes even if your Federal taxes are $0.
For example - California does not distinguish between Short-Term and Long-Term capital gains so every dollar of profit is taxed at ordinary rate. So in the example on the video a CA resident would still be on the hook for 8% in state income tax.
"Tax Gain Harvesting' you still have to pay STATE income taxes even if your Federal taxes are $0."
Just as you think he forgot to mention state income taxes, you also forgot to mention that some states don't have an income tax so there you go.
This is why people don't cover the state income taxes in videos most of the time. There are 50 states so how can they even address it? make a 2 hour video for a 15 minute topic?
@@mjs28s You are right, however for completeness sake, if one line can be said about some states requiring income taxes to be paid on these gains then it will keep people from surprises at tax time. For example, if you live in CA and you want to take full advantage of Tax Gain Harvesting then your state income tax will be 8% (MFJ) and Federal 12% (MFJ), so the saving is really only 4%.
@ManishSabu- c7n. Thanks for the info. CA taxes HSA too- is there anything in CA that not taxed for earners? Yet remains a “ sanctuary state.”
This was very simple to understand. I just subbed to your channel.
Good stuff, Ari.
A lot of us have been dividend reinvesting for years and have large individual positions. I think this could be useful to help us slowly diversify out of these concentrated positions.
Need to still be mindful on gains harvesting and ACA. Great video!
Great video. Thanks for educating everyone.
VERY helpful. You speak so clearly, and even I can understand you! 😁
Thank YOU
In the example of the person getting $300k in gains from selling her house (so she has $50k after the exclusion) she owes no taxes, but what happens to her healthcare? If she has been getting low cost healthcare due to her low income, does the sale of her house show as $400k of MAGI? She would no longer qualify for the healthcare plan she enrolled in. Does her healthcare subsidy go away? Does she have to payback any subsidy that she received earlier in the year?
I am not an expert so take this with a grain of salt but I think for that year they would have to simply pay the difference of the ACA premium credit.
If they’re really concerned with going over the limit for just that one year and losing the $6k, I imagine they could to a strategic cash out refinance and then sell.
But what scenario would realistically would this happen in?
Thank you for the info
Great video. You can say often as often as you like. 👍
HA - Thanks!
Does the Early retirement academy help with comparing Roth conversion vs tax gain harvesting? Or do we need to work with an advisor
Also any improvements made to the house can go against gains
Yes!
Can I use my capital loss to offset my tax liabilities for a Roth conversion on my 401K?
When calculating the gain obtained from selling a house, what expenses can be considered in the calculation? Others have commented that you can subtract the cost of home improvements, i.e., if you spent $100K to put an addition on the house, that $100K can be deducted from the overall gain to lower your tax exposure. What about mortgage interest - can that be deducted? Property taxes? Anything else we should look out for?
MFJ you pay zero taxes on less than 94k ? ordinary income? Im missing something here. You have to add ordinary income with capital gain income I thought?
$94k is for a married couple. Half that for single. His example is also if you only get your income from capital gains. If you also worked you would pay more taxes in the capital gains.
If I am making Roth conversions and use my brokerage account to pay for the taxes on those conversions, I need convert less than 47k as a single? person to pay 0% in capital gains?
So if we made combined taxable income just below $94,050 (from our jobs) and file taxes as MFJ, and sold stocks with realized gains (let’s say $100k) would we pay taxes on those gains ?
@@eddieloujones2673 you are correct
The 94k in wages counts on both the ordinary income and capital gains schedules, so the wages push your stock sales into the next bracket on the capital gains schedule. Your capital gains on the $100k would then be taxed at 15%.
Question: when you say "if her income is under $47k she won't have to pay capital gains taxes" does this mean that the "income" calculation is based on earned income (excluding the cap gains)? For example, if her income consists solely of Social Security in the amount of $40k, and she takes the standard deduction, she has income of about $26k. But if she sold Apple stock and captured $100,000 of gains, is she still being taxed at 0% on all $100k? Said differently, does the "income" figure exclude capital gains, or is the $47k/$94k threshold inclusive of cap gains?
Income of $26K is taxed 1st, capitol gains is taxed "ON TOP" of the ordinary income. so they would be taxed on $126K. 1ST 26K TAXED at [10%($23,200) +12%($2,800)=$26,000] the capitol gains starts at 26,000 and stacked on top, so $94,050 [capitol gain chart] of the 126K is taxed at 0% (94,050 - 26,000 = 68,050) THAT $68,050 is subject to the 0% capitol gain tax the remaining $31,950 is taxed at the 15% capitol gain tax (100,000 CG - 68,050 = 31,950)
Hope that helps you and does not make it more confusing.
To be kinda blunt, I am giving up on investing in stocks... I put between 2000 to 3000 a month and it's nothing but down down.... Sooooo frustrating and I only invest in boring big companies. What can I realy do?
You're right, the value of advisors cannot be overlooked. I used to handle investing myself but faced some losses 2020, thus consulted an advisor. As of today, I'm just very close to gains of $13Million after subsequent tax deductions.
@@AlbertiniCaputi This is Revolutionary! mind sharing info of this professional guiding you please? how to put my excess money to work to upgrade my social class has been my daily thought, thus the search for a reputable advisor
Can't divulge much, I take guidance from a Pennsylvania-based advisor 'Karen Lynne Chess' and most likely, the internet is where to find her basic info, simply do your research. Thank me later.
thanks for the lead, just searched Karen by her full name on the web, easily spotted her consulting page and was able to contact her, I really enjoyed starting up business with her. she is impeccable!
I have a regular taxable brokerage account and will have massive long term capital gains tax if I sell anything. Does it even make sense to sell some, pay tax, then buy in a Roth at only $8k per year?
What’s the worst case if you don’t sell? The stock could go down by much more than what you would pay in taxes.
@@earlyretirementari but if I sell it to pay off my mortgage. My tax burden will be huge!
Ari, after watching a video made by James in 2023, he made available for download the spreadsheet you referenced in your video (only it was last years version). Can you make the current 2024 spreadsheet available for download?
I like to take profits when stocks are up, which allows me to sell a smaller number of shares a prevent these capital gains. I have no mortgage and my tax burden is not huge. Give it a try.
While the content of this video is technically correct, it is misleading and lead viewers into believing that the first $94,050 (if Married Filing Jointly, or MFJ) is always tax free. For the vast majority, this is not always the case.
- You HAVE to account for Ordinary income, dividends, Short Term cap gains, pensions, Annuities, and any other taxable gains or incomes. We'll call this reference AA.
- For simplicity, if we use the formula, for 2024, MFJ: AA minus Standard Deductions (or itemized deductions) = X.
* If X is less than $94,500, THEN you can sell your Long Term (LT) Capital Gains up to on that difference and pay no LT taxes
* The reason is AA is taxed FIRST, then LT is taxed on TOP of that. In other words, if AA is $94,500 or greater, there IS NO BENEFIT for LT tax gain harvesting.