The article discusses the taxation on long-term versus short-term capital gains, emphasizing that long-term gains are favored. Individuals considering early retirement might want to reduce their income to minimize tax bills. One strategy involves earning a low income through part-time work, potentially allowing individuals below certain income thresholds to avoid capital gains taxes. However, high dividend income could complicate this plan. While taxable brokerage accounts offer flexibility, they do not provide the same tax advantages as Roth accounts, where gains and withdrawals are tax-free.
People who are single earning up to $47,025 don't pay long-term capital gains taxes. Married couples filing jointly earning up to $94,050 get out of taxes on long-term capital gains, too.
While the flexibility these taxable brokerage accounts offer is nice, the downside is that gains in these accounts are subject to taxes.
In a Roth retirement plan, your investment gains are yours to enjoy tax-free. And withdrawals are also tax-free.
The good news is that long-term capital gains are taxed more favorably than short-term capital gains, which apply to investments that are held for one year or less.
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