My 1st Million At 33 – yes, you can do it too

This is not another tax scam, but a tax law change. In 2008, if you qualify, you can pay 0% capital gain tax on your stock gain. But of course, this is not for everyone. If your marginal tax bracket is in 10% or 15%, you can pay 0% capital gain for any amount of stock gain before you exceed the 15% bracket. The maximum potential tax saving is about $3250 if you use $65000 for married filing joint, and all of the income comes from stock gain, which would be taxed at 5% in 2007, but will be taxed at 0% in 2008.

Although this doesn’t apply to me now, I was in 15% tax bracket only 7 to 8 years ago. I am sure that some of the younger readers here may take advantage of this, especially young couples. Even though you may not save much tax in total since you only pay 0% tax on the portion before your AGI (adjusted gross income) exceed the 15% bracket, it sure feels good. At the minimum, beating the inflation will be some 15% easier.

This tax saving however does not apply to kids under 19 or 24 if they are full-time students and dependent on their parents. But hey, who says that you must put your children as your dependents. You may save a lot more taxes if they (>19) simply file the returns on their own, paying a lot less capital gain, beating the kiddie tax at your own marginal bracket. Of course, this case is rare, but it would have applied to me, if not for the fact that my children are not more than 19.