Zero % tax rate on long-term gains and qualifying dividends

When your taxable income other than gains or dividends is in the 10% or 15% tax bracket, then most qualifying dividends and gains on sales of most assets owned for more than a year are tax-free until they push you into the 25% bracket. For 2016, that bracket starts at $37,651 for singles and $75,301 for married couples.

Caution: Zero percent gains and dividends will still hike your adjusted gross income, which can cause more of your Social Security benefits to be taxable and can squeeze some itemized deductions such as medical expenses.  And your state income tax bill may rise, since many states tax gains as ordinary income.

Caution: Long-term gains on collectibles, gold and precious metals do not qualify.

For those taxpayers who have long-term gains and qualifying dividends that are eligible for the zero percent rate, tax planning dictates that you should not take any capital losses that year (which is the opposite of the typical capital gains tax planning strategy). Rather consider taking even more of your long-term gains to the extent they are tax-free. By selling some investments that are profitable, and then buying them right back again (note: the wash sales rule does not apply to gains), you can get a step-up in basis on your current investments without incurring any federal tax liability.