In March, we discussed how to reduce the cost of funding your children’s education using several tax-favored strategies. One recommended, but commonly overlooked, option is generating long-term capital gains (owned for more than one year) and dividends that can be tax-free for federal income tax purposes.
That’s right—qualifying single students may pay ZERO federal income taxes on up to $58,475 annually of long-term capital gains and dividends received, since that income is offset by the $13,850 standard deduction, as well as a special 0% tax rate applicable on up to $44,625 of that income. Doctors often gift appreciated stock and/or real estate to their older children, who then sell it, to trigger the capital gains and dividends taxed at this special rate, assuming they successfully dodge the “kiddie tax.”
But the 0% tax rate isn’t just useful for tax-favored educational funding. While it’s been around since 2008, it’s often overlooked when doctors plan
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