Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Is the zero percent LTCG bracket dead?
Posted by: 47Percent, October 24, 2017 02:15PM

From everything I have seen, it looks like the zero percent bracket for LTCG and qualified dividends seems to be a casualty under the new (as of yet unreleased) plan.

That would be quite a blow for retirees whose primary source of income is dividends. I am a bit surprised that it hasn't gotten much ink. Has anyone heard much about it one way or the other.

Re: Is the zero percent LTCG bracket dead?
Posted by: Sven, October 28, 2017 01:15AM
I've seen nothing on the issue. It no doubt will get discussed once the bracket break points are announced and qualified dividend/ capital gains recipients are able to assess how much pain, if any, they are going to suffer. The key Code language to watch is in Section 1(h). It currently gives the break to tax advantaged income up to the limits of the 25% bracket. If the ZBA is to survive, I think the tell is going to be that the 25% language in 1(h) will be replaced with 12%.

Re: Is the zero percent LTCG bracket dead?
Posted by: Sven, November 2, 2017 05:43PM
I got the proposed House bill to come up on the laptop and it is hard to read. Small type and it skips around a bit. It looks like the ZBA concept in Section 1(h) of the Code survived. They knocked out some language and added others to conform to the compressed brackets that are being proposed. They also seem to have kept the $77,200 amount that would have been the case for 2018 anyway for income within the 25% bracket.

I do not have the energy to try to figure out how that number mechanically works with the proposed $90,000 upper limit of the 12% bracket. That is what Turbotax is for.

In all the talk about the big standard deduction the "additional" standard deduction in IRC 63(c) for age and blindness apparently did not survive. The text I looked at says a married couple filing jointly gets a standard deduction of $24,400, but I have seen $24,000 mentioned in a couple of different articles.


We shall see what else lurks within what appears to be 449 pages of stuff.

Re: Is the zero percent LTCG bracket dead?
Posted by: 47Percent, November 2, 2017 07:16PM

Thanks, Sven..

I was doing the same thing in the morning, I came to the same conclusion. They have defined some new terms like "15-percent threshold" and "20-percent threshold". The problem is they have hardwired the upper limit numbers at the 2018 levels as you have said. It looks like it will take another act of congress to move those numbers if the brackets change or to adjust them to inflation!

One thing that confused me was that the "Section 1(h)(1)" that is referenced talks about capital gains in general, and doesn't specifically refer to "LTCG or qualified dividends". I assume that is resolved somewhere else in the belly of the text which is somewhat beyond me.

Over all, this does give some hope.

Re: Is the zero percent LTCG bracket dead?
Posted by: Sven, November 2, 2017 08:17PM
Yup, somewhere tucked in an obscure corner of the Code is babble that gets qualified dividends onto the ZBA ark. Hope you had a more readable version that I had. I still swear I saw $24,400 in the version I saw as the MFJ standard deduction. I am going to look for a different version. I was on the fence whether the ZBA number was going to wind up being the same as the 12% limit. Not!, but it at least is still indexed.

Re: Is the zero percent LTCG bracket dead?
Posted by: 47Percent, November 2, 2017 08:34PM


$24,400 for MFJ is the right number..

[waysandmeansforms.house.gov]

The (original) version I compared to decipher the "changed" and "amended" language was..

[www.law.cornell.edu]


Re: Is the zero percent LTCG bracket dead?
Posted by: Sven, November 2, 2017 08:41PM
The Cornell stuff is usually not only correct but easier to read. What follows is what my browser does to me to punish me for occasionally using another browser.


21
SEC. 1002. ENHANCEMENT OF STANDARD DEDUCTION.
1
(a) I
NCREASE IN
S
TANDARD
D
EDUCTION
.—Section
2
63(c) is amended to read as follows:
3
‘‘(c) S
TANDARD
D
EDUCTION
.—For purposes of this
4
subtitle—
5
‘‘(1) I
N GENERAL
.—Except as otherwise pro-
6
vided in this subsection, the term ‘standard deduc-
7
tion’ means—
8
‘‘(A) $24,400, in the case of a joint return
9
(or a surviving spouse (as defined in section
10
2(a)),
11
‘‘(B) three-quarte



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