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The IRS made dozens of inflation adjustments for 2023, including the long-term capital gains brackets for investments held for over a year, and it’s less likely that selling investments this year will affect your 2023 tax bill. Based on a report by Investopedia on February 9, 2023, the new adjustments mean that there is a higher income threshold for the 15% or 20% brackets for investment earnings, and as a result, you may have more taxable income. According to a certified financial planner and enrolled agent, this adjustment will be pretty significant.
The higher standard deductions and Income thresholds for capital gains in 2023 mean that it’s more likely to fall into the 0% bracket, with a taxable income of $44,625 or less for single filers and $89,250 or less for married couples filing jointly, as reported by CNBC on October 20, 2022. Therefore, it’s possible to sell profitable assets without tax consequences if you have taxable income below the thresholds.
Selling investments may also be a chance to diversify amid market volatility for some investors. “It’s a good tax-planning opportunity,” said Tommy Lucas. However, Jim Guarino, a CFP, warned that it’s important to have a handle on your entire reportable picture when taking gains or tax losses. That includes estimating year-end payouts from mutual funds in taxable accounts, which could cause a surprise tax bill, he said.
It’s also essential to consider your taxable income, including payouts, since there won’t be taxable gains in the 0% capital gains bracket. “Some additional loss harvesting may be useful if you’ve got additional capital gains coming down the road,” added Guarino. Therefore, the decision to sell investments depends on your individual situation.
FILE PHOTO: Euro, Hong Kong dollar, U.S. dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this picture illustration, in Beijing, China, January 21, 2016. REUTERS/Jason Lee
