John McCluskey, CPA

There are changes this year in tax rules for capital gains—some good, some not-so-good.

The good news: For those in the 10 or 15-percent brackets, there is zero tax on long-term capital gains, but there are caveats. For instance, the kiddie tax has been expanded to age 19, and to age 24 for full-time students who earn less than half their support. That means those low-income youngsters no longer get a free ride but will be taxed at their parents’ rate.

Not so good: If the capital gain boosts income into the 25-percent bracket, the zero capital-gains rate applies only to that portion of the gain that fits into the lower 5 or 10 percent brackets. In 2008, the 25-percent bracket starts above $65,200 for couples.

More: For those in higher brackets, too many gains might trigger the alternative minimum income tax, raising the effective tax rate above 15 percent as exemptions are wiped out.

Get the answers to your tax questions from the know-hows at

McCluskey & Co., PC
Route 100, West Dover, VT
802/464-0551
e-mail: taxes@sover.net
www.mcclusk.com