The 2015 federal income tax rates on long-term capital gains are the same as last year: 0%, 15%, and 20%. However, the maximum 20% rate for higher-income individuals can only affect singles with 2015 taxable income (including long-term gains) above $413,200, married joint-filing couples with income above $464,850, heads of households with income above $439,000, and married individuals who file separate returns with income above $232,425. Higher-income individuals also could be hit by the 3.8% NIIT, which can result in an effective marginal federal income tax rate of up to 23.8% (20% + 3.8%) on 2015 long-term capital gains.
As you evaluate investments held in your taxable brokerage firm accounts, consider the tax impact of selling appreciated securities (currently worth more than you paid for them) before the end of this year. For most taxpayers, the federal income tax rate on long-term capital gains is still much lower than the rate on short-term gains. Therefore, it often makes sense to hold appreciated securities for at least a year and a day, before selling in order to qualify for the lower long-term gain tax rate.
Biting the bullet and selling some loser securities (currently worth less than you paid for them) before year-end can also be a tax-smart idea. The resulting capital losses will offset capital gains from other sales this year, including high-taxed short-term gains from securities owned for one year or less. The maximum rate on short-term gains is 39.6%, and the 3.8% NIIT may apply too, which can result in an effective marginal Federal income tax rate of up to 43.4% (39.6% + 3.8%).