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Did you know you could generate over $100,000 in retirement income and pay zero in federal taxes? I know it sounds too good to be true, but this strategy can actually help you keep more of your retirement income. Stick around to learn how it works and how it could help you boost your financial future in retirement. In this video, you’ll learn how to use the 0 % tax rate on capital gains

to earn tax-free income in retirement. Hi there, I’m Danny Gudorf, a financial planner and owner of Gudorf Financial Group. With over 15 years of experience in helping retirees make the most of their money. Let’s dive into how you can use this tax strategy to keep more of your money and set yourself up for a more comfortable and rewarding retirement. When most people think about their dream retirement,

Three main goals come to mind. First, generating the most amount of income possible, paying the least in taxes, and having the freedom to spend time doing what they love with the people they care about. Today, I’m going to show you how getting a 0 % tax rate on capital gains can help you achieve all three of these goals. This episode was inspired by an article

that I read about the 0 % tax rate on capital gains. And it got me thinking how many people don’t realize this strategy exists or think it’s out of reach. Most folks save for retirement in their IRA accounts, like 401Ks, traditional IRAs, and Roth IRAs, which have tax advantages, but not as many people have much in a taxable brokerage account.

I want to show you how this tax saving opportunity works and explain why it’s smart to spread your savings across different types of accounts for more flexibility in tax efficiency and retirement. But before we get into the details of the 0 % tax rate on capital gains, it’s important to understand the difference between how regular income and investment income are taxed. Your earnings from work

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as well as distributions from traditional IRAs or 401ks are taxed as ordinary income. On the other hand, gains or losses made in a brokerage account or taxable investment account are subject to capital gains tax rates. Now, let’s look at the 2024 capital gains tax brackets for both single and married couples filing jointly. If you’re a single filer in 2024, your taxable income is

below $47,025, you’re in the 0 % capital gains tax bracket. If your income is between $47,026 and $518,900, you would be in the 15 % capital gains bracket. If your income is over that $518,900 number, you’d be in the 20 % capital gains bracket. For married couples filing jointly,

The 0 % tax bracket applies to taxable income under $94,050, and the 15 % rate is for income between $94,051 and $583,750. And anything above that is taxed at the 20 % capital gains rate. While most Americans will end up in the 15 % capital gains bracket since it covers such a wide income range,

But today, we’re going to focus on how you can put yourself in position to take advantage of the 0 % capital gains tax.

If you’re single with an income below $47,025 or married filing jointly with an income under $94,050, any long-term capital gains you generate will be taxed at 0%. Now, we also have to factor in the standard deduction, which for single filers is $13,850 and $27,700 for married couples filing jointly.

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The single filers can actually have up to $74,725 in total income and married couples filing jointly can have up to $121,750 all while being taxed at the 0 % rate in retirement. With proper planning, this means you can still benefit from the 0 % capital gains rate even if your total income is higher

than the initial threshold. Let’s take a look at an example. Imagine a married couple, both 64 years old and they’re retired with no other income for the current year in 2024. They have not yet started collecting social security benefits and they have a brokerage account worth $500,000 with a cost basis of 250,000. So they have a 250,000 in unrealized long-term capital gains.

Suppose they decide to sell $150,000 from this account to cover their living expenses for the year. Since half of the account value is basis and half is gains, the $150,000 would be split as follows. $75,000 would come from long-term capital gains and $75,000 would come from their original investment basis. With this sale,

their taxable gain is $75,000. Because this amount is within the $121,750 threshold for married couples filing jointly, they would qualify for the 0 % capital gains tax rate on the full $75,000, meaning they won’t owe any federal income taxes for that year. This allows them to cover all of their living expenses while taking advantage

of tax-free income in retirement. This allows them to keep more of their money working for them in retirement. Now, let’s look at a more complex scenario using the same retired couple with a $500,000 brokerage account that has that $250,000 basis. This year, they need to withdraw $50,000 from their traditional IRA to cover their living expenses.

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while still postponing Social Security benefits. Additionally, they decide to sell $150,000 from their brokerage account, resulting in the same $75,000 in capital gains and $75,000 in basis. Here’s how their income would look in this situation. They would have $50,000 from IRA withdrawals counted as ordinary income.

and they would have $75,000 in capital gains from their brokerage account. Their total adjusted gross income, AGI, for that year is $125,000, $50,000 from their IRA, and $75,000 in capital gains. After applying the standard deduction of $27,700 for married couples, their taxable income would be $97,300. Since the couple

has $50,000 in ordinary income, subtracting the standard deduction of $27,700, leaves them with $22,300 of taxable ordinary income. To determine how much of their capital gains would qualify for the 0 % bracket, we can use the $94,050 threshold for married couples filing jointly and subtract $22,300 of their

taxable ordinary income, leaving them with $71,750 of capital gains eligible for the 0 % tax bracket. The remaining $3,250 of capital gains, which is the $75,000 of total gains minus the $71,750 at 0%, will be taxed at the 15 % rate. So here’s how the tax breakdown looks.

71,750 of capital gains taxed at 0%. 3,250,000 of capital gains taxed at 15%, resulting in $487.50 in federal tax. In total, the couple’s federal tax liability on their income of roughly $200,000 would be roughly $487.50. Illustrating,

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how careful planning can allow them to maximize the 0 % capital gains rate and keep their tax bill very low. There are two big takeaways here. First, every taxpayer in America has the chance to get the 0 % capital gains rate regardless of their net worth because it depends on income, not wealth. In years where your income is lower, you should think about how to utilize this 0 % capital gains bracket

by selling gains and increasing your cost basis and reducing your tax bill. This can be a powerful tool to improve your long-term retirement situation and make sure you keep more of your hard-earned Second, it’s pretty rare to be able to pay a 0 % tax rate on a large amount of money. Aside from using standard or itemized deductions,

Most other income sources are taxed at a minimum rate of 10%, but capital gains give you a unique chance to get a 0 % tax rate. So it’s a good idea to include this in your retirement plan. This strategy can help you maximize your income and minimize your taxes, giving you more freedom to spend on what matters most to you in retirement. This brings us to the idea of tax gain harvesting.

being smart about when you sell your investments in your brokerage account with gains on them. By choosing years when your income is low, you can take advantage of the 0 % capital gains rate, creating income and taxes as well. With careful planning, you might even be able to create an income for several years without paying taxes by managing your income sources and timing.

your capital gains. But most of our clients, be able to take advantage of this strategy, they have to have money inside of a brokerage account heading into retirement. Throughout your retirement, tax gain harvesting and using the long-term capital gain rate at the 0 % bracket will help you pay less in taxes compared to other types of income. The key,

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And the key takeaway is to spread your savings across many different account types in retirement. We have things such as 401ks, traditional IRAs, Roth IRAs, and this taxable brokerage account. This way, you’ll have the flexibility to make tax-efficient choices for yourself and your family when you decide to retire. Diversifying your savings will allow you to adapt to the changing tax rules and take advantage

of all opportunities as they arise. Building tax diversification during your career or early in retirement can be done by utilizing these different types of investment accounts. The best way to ensure a successful retirement is to have a plan that includes tax efficiency, income diversification, and flexibility. By spreading your savings across different account types and understanding how to utilize tax gain harvesting,

you can make your money last longer and create a more enjoyable retirement. Remember, retirement planning isn’t just about saving money, it’s about knowing how to use your savings while achieving your retirement goals. Once again, I’m Danny Gudorf, the owner of Gudorf Financial Group. And if you’re ready to discover how we can help you make the most of your retirement, visit Gudorffinancial.com forward slash get started.

There you can easily schedule a 20 minute introductory call with our team to kickstart your free retirement assessment and start the planning for the future you deserve. If you’d enjoyed learning about paying zero taxes on capital gains, you’re going to definitely want to check out our next video right here on how to pay zero taxes on your social security benefits. In that video,

We’ll explore strategies you can use to avoid taxes on your Social Security income. Allowing you to keep more of your hard earned retirement savings? Click on the link to continue watching and learn more ways to maximize your retirement income. Have a great day.