Allocating "income" sources for 0% federal tax

[stevemac]

This is one of those items where it all makes sense in my head but it would definitely help to see if I've overlooked something -- and this should be short.

Two sources of retirement funds for this question: LTCG from a taxable fund, and income from a SEP IRA. If I understand correctly, I will have 0% federal tax liability if I (a) take withdrawals from my SEP IRA less than the standard deduction (or a bit more if property tax, HSA deposit, etc. reduce taxable "income"), and (b) sell LTCG stock in an amount under ~$96,000 (married couple) for 2025.

Have I missed anything?

Thanks very much.
(PS --I've also posted this over in the city-data.com, in case you see it there as well).

 

[audreyh1]

If your SEP-IRA withdrawals and all other ordinary income (such as interest) are less than your standard deduction, and the remainder is all LTCGs up to $96K plus deduction, then yes I think you are looking at $0 tax liability.

 

[stevemac]

Thanks, it just seems to make sense, which is when thoughts can be the most dangerous.

 

[pb4uski]

You got it... assuming for 2025 and MFJ. I get up to $30,000 of ordinary income and $96,700 of qualified dividends/LTCG result in $0 tax. So a married couple can have as much as $126,700 of income and pay no tax if the income is properly structured. Ain't America great!

However, if you think that your RMDs later in life will be taxed at 22% then why let the 10% and 12% tax brackets go to waste. Fill them with low tax cost Roth conversions and rather than LTCG or a mix of both.

IRS & State Tax Calculator | 2005 -- 2025

Easily and accurately calculate IRS & State personal income taxes online.

www.irscalculators.com

 

[Dalton]

This is a quick and easy tax calculator for just regular income and LTCG. The display it gives is really helpful to see how much of the tax is coming from which bracket.
tax calculator

 

[stevemac]

However, if you think that your RMDs later in life will be taxed at 22% then why let the 10% and 12% tax brackets go to waste. Fill them with low tax cost Roth conversions and rather than LTCG or a mix of both.

That was a separate item I'm considering; I first just wanted to make sure that what seemed like an obvious 0% tax rate didn't overlook something, which then would affect the Roth conversions at rates lower than expected RMDs about 8 years from now.

And Dalton, thanks for the link to the tax calculator.