Don't Mess With Taxes

This is not an April Fools' Day joke.

Some investors will not owe the Internal Revenue Service a cent of tax when they sell their assets.

But as today's Daily Tax Tip notes -- and there usually is a "but" when you're talking taxes -- there are some limits.

Let's start with some good news. There is no time limit on the life of this tax break.

It was a temporary part of the Bush-era tax laws and technically expired at the end of 2012. But it was made permanent on Jan. 2, 2013, when the American Taxpayer Relief Act of 2012 became law.

So you can use this zero (nada, nil, nothing, zilch, goose egg) tax when you make your investment and asset sales plans this and future tax years.

Now for the not-so-good news. There are two key items to consider here.

First, the 0 percent capital gains tax rate applies only to long-term assets. These are the ones owned for more than a year. Short-term sales are still taxed at your ordinary income tax rate, which ranges from 10 percent to 39.6 percent.

Second, this no-tax rule has an earnings limit.

Applies to 10 and 15 percent brackets only: If your income falls completely into the two lowest tax brackets -- 10 percent and 15 percent -- you're in luck. You can sell long-term assets and with little filing hassle escape any capital gains taxes.

For 2013, the 15 percent bracket tops out at:

• $36,250 for a single filer,
• $48,600 for a head-of-household taxpayer and
• $72,500 for a married couple filing a joint return.

But (yep, another one) don't despair if you make more. Because of the progressive system of the tax code and the specifics of the no-capital-gains-tax law, some folks whose income falls into higher tax brackets still might benefit from this provision.

And as also is the case with taxes, your individual tax and financial situations -- age, income, types of investments -- make a difference as to how this might work for, or against, you.

The tax experts in the tip over at Bankrate.com offer some insight and advice on how this zero tax rate applies in certain circumstances.

Check it out. It might work for you or it might not. But any time there's a chance you won't owe Uncle Sam anything, it's worth looking into.

No joke. Any day of the year.

You also might find these items of interest:

• Donating appreciated assets to charity
• 5 higher taxes that rich people now face
• Harvest capital gains for future tax savings