Navigate Through the Multitude of Rules for Capital Gains and Losses

For federal income tax purposes, the ordinary income of individuals is taxed at rates of 10%, 15%, 25%, 28%, 33%, and 35% in 2008. Adjusted net capital gain (ANCG), however, is taxed at much lower rates. ANCG includes certain long-term capital gain and qualified dividends. During 2008 through 2010, ANCG is taxed at 0% for taxpayers in the 10% and 15% ordinary income tax brackets. One might think that the subject of ANCG has limited application: the retired and semi-retired. Beginning in 2011, the tax rate on ANCG is scheduled to jump up. For instance, qualified dividends will be taxed as ordinary income with rates ranging from 10% to 35%. Sometime in the future, when people are talking to their grandchildren, they might say, they remember the days when gas cost $.50 per gallon, bread cost $.22 cents per loaf, and there was a 0% tax bracket (although all three did not occur at the same time).