If you’re planning to sell investments or rebalance your taxable portfolio, you may be less likely to trigger a tax bill in 2023, experts say.
The agency also bumped up income thresholds for the 0%, 15% and 20% long-term capital gains brackets for 2023, levied on profitable assets held for more than one year.
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“It’s going to be pretty significant,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
With higher standard deductions and income thresholds for capital gains, it’s more likely you’ll fall into the 0% bracket in 2023, Lucas said.
For 2023, you may qualify for the 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,” calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
By comparison, you’ll fall into 0% long-term capital gains bracket in 2022 with a taxable income of $41,675 or less for single filers and $83,350 or less for married couples filing jointly.
With taxable income below the thresholds, you can sell profitable assets without tax consequences. And for some investors, selling may be a chance to diversify amid market volatility, Lucas said.
“It’s there, it’s available, and it’s a really good tax planning opportunity,” he added.
Whether you’re taking gains or tax-loss harvesting, which uses losses to offset profits, “you really have to have a handle on your entire reportable picture,” said Jim Guarino, a CFP, CPA and managing director at Baker Newman Noyes in Woburn, Massachusetts.
That includes estimating year-end payouts from mutual funds in taxable accounts — which many investors aren’t expecting in a down year — and may cause a surprise tax bill, he said.
“Some additional loss harvesting might make a lot of sense if you’ve got that additional capital gain that’s coming down the road,” Guarino said.
Of course, the decision hinges on your taxable income, including payouts, since you won’t have taxable gains in the 0% capital gains bracket.