ChooseFI 517 | Maximize Your Wealth: Understanding Capital Gains Tax Strategies | With Cody Garrett
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Oct 21, 2024 Cody Garrett, a Certified Financial Planner from Measure Twice Money, shares invaluable insights on capital gains tax strategies. He explains capital gains harvesting and how it can minimize tax liabilities on investments. The discussion covers the advantages of long-term capital gains versus ordinary income, and strategies for effective tax management during retirement. Cody also highlights the interplay between taxable income and health insurance subsidies, emphasizing smart planning for financial independence while prioritizing lifestyle choices.
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Two Income Types
- There are two main income types: ordinary income (wages, interest) and capital gains (from selling assets).
- Capital gains have preferential tax rates (0%, 15%, 20%) for long-term investments (held over one year).
Preferential Capital Gains Rates
- Long-term capital gains rates are generally much lower than ordinary income tax rates.
- Most people pay 0% or 15% on long-term gains, with 20% only for the highest earners.
Maximize Zero-Percent Rate
- If married filing jointly with zero ordinary income, you can realize up to $123,250 in long-term capital gains tax-free.
- This creates a "Roth IRA" within your taxable brokerage account.