Do you expect a tax bill in 2021 for trading stocks and crypto? According to experts, you could be eligible for the long-term capital gain rate of 0% depending on your taxable income.

Calculating taxable income is done by subtracting either the higher of the itemized or standard deductions from the adjusted gross income. These are earnings less so-called “above the line” deductions.

And the threshold for the 0% capital gains rate is even higher — with possible joint six-figure gross earnings — if you’re filing taxes with a spouse.

Dale Brown (chairman of the board) stated that “a lot of people don’t know there’s an 0% tax rate for long-term capital gain, depending on what level of income they have.” Salem Investment CounselorsWinston-Salem in North Carolina was ranked second by CNBC. 2021 FA 100 list.

For long-term capital gains, rates of 0% to 15% and 20% are available. The 0% bracket is for married couples that file jointly in 2021, with taxable income below $80 800 ($40 400 for single investors).

In 2022, the 0% thresholds will rise to $83,350 in joint filings and $41,675 for single taxpayers.

Consider, for instance, that a married couple files together and has a combined gross income of $100,000 by 2021.

Couples can take the standard deduction of $25,100, common among joint filers. Their taxable income falls to $74,900. This is lower than the $80 800 threshold for 0% long term capital gains tax.

If the couple has itemized deductions above $25,100 — such as state and local taxes, medical expenses or charitable gifts —  they may claim a higher write-off and earn more income while staying below the limits, Brown said.

Depending on how much the couple earns, you may be eligible for a lower tax bill.

Brown explained that clients who had low incomes of six figures paid no federal income tax. He said this to explain how someone earning only long-term capital gain, qualified dividends, and exempt municipal bond interest might not be taxable.

Brown explained that one strategy for someone who is below the threshold to sell a profitable asset may be to pay no capital gains tax over the long-term and then repurchase it for a so called “stepped-up basis”. This involves adjusting the purchase price at the current value in order for less taxes in the future.  

He said that investors should not sell more than they have in a taxable portfolio. The tactic increases income, but could trigger excessive thresholds and other negative consequences.

Juan Ros stated, “Investors ought to ask their tax preparationr to run an projection for this years to see where they fall within the brackets,” Forum Financial Management, LP, Thousand Oaks, California, certified financial advisor

You may be able to reduce your taxable income to the point that it falls within the 0% tax bracket by making individual contributions to retirement accounts or deposits into health savings accounts.

Judson Meinhart is a CFP, and the manager of financial planning at Parsec Financial, Winston-Salem.

He stated that “all of these actions are great to lower current income and possibly realize capital gains under the 0% bracket.” It limits your ability pay income taxes at historically low rates.