What are the capital gains tax brackets for 2024?
For the 2024 tax year, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or less. The rate jumps to 15 percent on capital gains, if their income is $47,026 to $518,900. Above that income level the rate climbs to 20 percent.
As the new year kicks off, some workers could see a slightly bigger paycheck due to tax bracket changes from the IRS. The IRS in November unveiled the federal income tax brackets for 2024, with earnings thresholds for each tier adjusting by about 5.4% higher for inflation.
What is the 3.8% surtax? A 3.8% surtax applies to net investment income for most single filers with adjusted gross income (AGI) above $200,000 and most couples filing jointly with an AGI above $250,000.
For 2024, assuming no changes, Ellen's standard deduction would be $16,550: the usual 2024 standard deduction of $14,600 available to single filers, plus one additional standard deduction of $1,950 for those over 65.
For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.
Capital gains are generally included in taxable income, but in most cases, are taxed at a lower rate.
The Net Investment Income Tax (“NIIT”) or Medicare Tax is a 3.8% surtax imposed by Section 1411 of the Internal Revenue Code on investment income.
A Medicare surtax of 3.8% is charged on the lesser of (1) net investment income or (2) the excess of modified adjusted gross income over a set threshold amount. The threshold is $250,000 for joint filers, $125,000 for married filing separately, and $200,000 for all other filers.
The NIIT is set at 3.8% for 2024, as it was for 2023. To give some background, the net investment income tax is part of the Health Care and Education Reconciliation Act of 2010. While the NIIT might seem out of place here, it was actually created to help fund the aforementioned healthcare reforms.
Since the tax break for over 55s selling property was dropped in 1997, there is no capital gains tax exemption for seniors. This means right now, the law doesn't allow for any exemptions based on your age. Whether you're 65 or 95, seniors must pay capital gains tax where it's due.
Why do I owe so much in taxes in 2024?
There are a lot of variables that affect your refund or tax due including how much you earned, how much tax you had withheld, your filing status, the number of dependents you claim, your deductions and credits, etc. You may have lost Earned Income Credit or the Child Tax Credit— did a child turn 17?
For tax year 2023, the additional standard deduction amounts for taxpayers who are 65 and older or blind are: $1,850 for single or head of household.
You report the taxable portion of your social security benefits on line 6b of Form 1040 or Form 1040-SR. Your benefits may be taxable if the total of (1) one-half of your benefits, plus (2) all of your other income, including tax-exempt interest, is greater than the base amount for your filing status.
If you are 65 or older AND blind, the extra standard deduction is: $3,700 if you are single or filing as head of household. $3,000 per qualifying individual if you are married, filing jointly or separately.
Bonus Depreciation ramped down to 80% in 2023, and will be reduced to 60% for 2024. Bonus depreciation will continue to ramp down for ensuing years: 40% for 2025, 20% for 2026, and 0% beginning in 2027.
H.R. 7024 would increase the reporting threshold for the 1099-MISC and 1099-NEC from $600 to $1,000 for payments made on or after January 1, 2024. For future years, this threshold would be tied to inflation. The bill would also decrease the reporting threshold for payments of direct sales from $5,000 to $1,000.
Long-term capital gains can't push you into a higher tax bracket, but short-term capital gains can. Understanding how capital gains work could help you avoid unintended tax consequences. If you're seeing significant growth in your investments, you may want to consult a financial advisor.
The taxation of capital gains places a double tax on corporate income. Before shareholders face taxes, the business first faces the corporate income tax.
Avoiding capital gains tax on your primary residence
You can sell your primary residence and avoid paying capital gains taxes on the first $250,000 of your profits if your tax-filing status is single, and up to $500,000 if married and filing jointly. The exemption is only available once every two years.
Adjusted gross income, also known as (AGI), is defined as total income minus deductions, or "adjustments" to income that you are eligible to take. Gross income includes wages, dividends, capital gains, business and retirement income as well as all other forms income.
How do I avoid 3.8% investment tax?
Sell investments at a loss to offset investment gains. Defer capital gain, such as selling the investment in the future instead of selling it now. Use Section 1031 like-kind exchange which is selling an investment property and using that money to buy another investment property.
Answer: A big-enough capital gain can trigger Medicare's income-related adjustment amount, which are surcharges on your Part B and Part D premiums. As you note, there's a two-year delay between the higher income on your tax returns and higher premiums.
NIIT is a tax on net investment income. Those who are subject to the tax will pay 3.8 percent on the lesser of the following: their net investment income or the amount by which their modified adjusted gross income (MAGI) extends beyond their specific income threshold.
Tax brackets and marginal tax rates are based on taxable income, not gross income.
Each joint filer 65 and over can increase the standard deduction by $1,550 apiece, for a total of $3,100 if both joint filers are 65-plus.
