Here is a link that sort of explains it:
Link
What are some strategies to take advantage of this? If I can qualify I will be rebaslining my investments, not sure if this will apply to savings bonds as well.
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Sweet. Thanks for the link.
Well, one clearly advantageous thing would be to sell and rebuy investments which have a capital gain for you. You'd be resetting your cost basis. There is no wash rule for gains, just losses.
Couple of questions:
If you are married and dont qualify, can you file seperate and have one person qualify and use them?
Can you gift stocks to children and have them sell it?
Does this also work for selling realestate? or effect estate planning for reseting cost basis?
Good post!
be careful though. Your capital gain will be added onto your adjusted grosss income and push you into a higher tax bracket. So you may still need to pay 5% capital gain tax instead of zero.
Just a thought, I had some stock I wanted to have put in a 529, seems like it might be a good time to do it, sell (pay no gain), and then buy
fadippides said:Couple of questions:
If you are married and dont qualify, can you file seperate and have one person qualify and use them?
Can you gift stocks to children and have them sell it?
Does this also work for selling realestate? or effect estate planning for reseting cost basis?If you don't get a response from the tax gurus in this thread, why not post again in the stickied tax thread?
ThursdaysChild said:If you don't get a response from the tax gurus in this thread, why not post again in the stickied tax thread?
I was going to post this there, but I figured while this does deal with taxes, there is a lot of other strategy that can be used with it as well for planning purposes.
In the 10% and 15% brackets, the current tax rate for long-term capital gains is 5%. That is pretty attractive, but it still can't match the 0% rate that will be in effect from 2008 to 2010. This year, taxable income up to $61,300 qualifies a married couple filing jointly for the 15% bracket.
- From the article
nmathew said:Well, one clearly advantageous thing would be to sell and rebuy investments which have a capital gain for you. You'd be resetting your cost basis. There is no wash rule for gains, just losses.
Just for completeness, this would also reset your short vs. long term status.
fadippides said:Couple of questions:
If you are married and dont qualify, can you file seperate and have one person qualify and use them?
Can you gift stocks to children and have them sell it?
Does this also work for selling realestate? or effect estate planning for reseting cost basis?
No
No
Yes/Yes
fadippides said:
Can you gift stocks to children and have them sell it?
Fairmark on Gifts of Stock
Fair Market Value Exceeds Donor's Basis
If the fair market value of the stock at the time of the gift is greater than or equal to the donor's basis, then your initial basis is the same as the donor's basis, with a possible increase for a portion of the gift tax that was paid.
My reading is that you can indeed to this in a tax-effective way. Assuming you don't run afoul of the gift tax laws ($12K/year/person) and the kiddie tax rules (less than $1700 in investment income for 2007), I think this should work. If you give appreciated stock, your child gets your cost basis and then sells it for the same gain but less tax. Seems like you could shelter gains of up to $1700/kid this way. Watch out for the expanded scope of the kiddie tax in 2008. There are also opportunities to give to young adults who don't have much income yet in the same way - a good idea if your children have just grown up and aren't earning a lot yet (especially if they're also married).
Being no financial guru, I want to make sure I understand, sorry. Could I roll my traditional IRA over into a Roth tax free?
I want to use your accountants.
I thought everyone on FW made at least $100,000. How on earth are you all in the 10% or 15% tax bracket? 
dealchaser72 said:Being no financial guru, I want to make sure I understand, sorry. Could I roll my traditional IRA over into a Roth tax free?
No you can't rollover your IRA into a Roth tax free. This tax break is only for long term Capital gains. Transfers from a IRA to a Roth are NEVER considered Capital gains...just ordinary income that bumps you potentially up into a higher tax bracket (where you will be in-eligible for the 0% Captial gain tax break)...
asdf9876 said:I want to use your accountants.
I thought everyone on FW made at least $100,000. How on earth are you all in the 10% or 15% tax bracket?
Im with you on that one!!
Up here in CT I think if you are in the 15% bracket, you are about to move out of CT.....everything is just so friggen expensive.
-Chris
asdf9876 said:I want to use your accountants.
I thought everyone on FW made at least $100,000. How on earth are you all in the 10% or 15% tax bracket?
If a married couple were making around $100,000, deductions might push them below this threshold. The problem is that most folks around here make over $200,000. 
--Galabar
Married couple would need almost 40K in deductions to hit the 15% threshold.
Thats a LOT of deductions!! Biggest deduction I have would be mortgage interest and it would barely put a dent in that 40K. I know you can get creative, but I think that amount of creativity would border on red-flag for IRS audit.
-Chris
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