By Kay Bell • Bankrate.com
You heard right. There's no capital gains tax -- nada, nothing, zilch, zero -- on the sale of assets held for more than a year.
But you might not have heard the full story.
Bob D. Scharin, senior tax analyst from the tax and accounting business of Thomson Reuters, calls the law that was made a permanent part of the tax code Jan. 2, 2013, "the ultimate tax rate reduction." But as is often the case with tax provisions, this modification comes loaded with restrictions.
First, the elimination of capital gains tax applies only to assets owned for more than a year. Short-term sales remain taxed at your ordinary tax rate.
Then there is a
And it's not for every investor. Some young investors have been expressly excluded from the zero percent option. Others, such as Social Security recipients, could find that untaxed capital gains might mean new or additional taxes on their retirement benefits.
So before you rush to your broker to sell all your stocks and mutual funds, check out the law's finer points and how they might or might not apply to you.
Cashing in on lower capital gains taxes
Long-term capital gains taxes were first eliminated for some low- and moderate-income individuals in 2008. This zero-tax break was made a permanent part of the tax code Jan. 2, 2013, when the American Taxpayer Relief Act, or ATRA, was signed into law.