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October 19, 2015

0% Capital Gains Rate: Good news taxpayers. Although the government has enacted a number of tax changes for 2015, the capital gains tax rate is staying the same.

If you sell investments that are held for less than a year, you’ll pay your income tax rate on your gains, which ranges between 10% and 39.6%. On the other hand, long-term capital gains are taxed at a rate of 0%, 15%, or 20%, depending on which marginal tax bracket you fall into. Usually, taxpayers in the 10% or 15% marginal tax bracket pay no long-term capital gains taxes. The majority of taxpayers will pay a 15% long-term capital gains tax in 2015. The 20% tax rate was introduced last year and only applies to taxpayers that fall into the highest marginal tax bracket of 39.6%.

Since the 0% capital gains tax rate is available to all taxpayers in the 10% and 15% tax brackets, this could be particularly beneficial to retirees who are starting to use part of their savings to supplement their incomes. For 2015, married taxpayers qualify for the 0% rate if their taxable income is $74,900 or less, for single taxpayers $37,450 or less.

Starting Social Security: If you are considering receiving your social security benefit, you have lots of questions. The best place to get specific answers about the amount of benefit you are entitled to based upon your personal earnings history is your local social security office.

62-66-70. These are the “key” ages. “Early” benefits can begin at any month after age 62. “Full Retirement” benefits start at age 66. “Delayed” benefits can start as late as age 70.

“Early” Benefits. You can start receiving payments at age 62. There are two problems. (1) Your benefits are reduced by 25% of whatever amount the formulas give for your earnings history. Start at an age between 62 and 66, the reduction is prorated over 48 months. This will be your benefit for life. (2) If you do continue working and earn too much in any year, you give back some of the benefit. This earnings limit stops at age 66.

“Full Retirement Age” (if you were born from 1943 through 1954). At age 66, you receive the “full retirement” amount, with yearly inflation adjustments. No earnings limits apply. In fact, earnings will now increase your benefits slightly. Your normal retirement age will increase by 2 months (added on to age 66) for each year of birth from 1955 through 1959. As an example, if you were born in 1957 then your full retirement age is 66 years and 6 months. If you were born in 1960 or later then the full retirement age is 67.

“Delayed” Benefits. For every month you delay after age 66, your benefit increases, but not past age 70. The annual figure is about 8%. No earnings limits apply.