00:00Fellow investors, it's that special time of year again
00:02The time where we finally stop debating who has the best portfolio and we come together on something we agree on, minimizing our tax bill
00:09The IRS just released the 2026 tax brackets and there are some solid changes ahead, especially if you're a single filer
00:18In this video, we're going to break down the brand new 2026 federal tax tables, look at how capital gains and qualified dividends fit into the picture, and walk through a clear example showing exactly how these updates impact you as an investor
00:35Our tax system is simpler than most people realize
00:38Lock in for this one because the more we can save on taxes, the more we can invest and that gets us closer to all of our goal, time freedom
00:47If you're new to the channel, welcome
00:49My name is Jeff Teeples and here we aim to grow your wealth with simple, time- tested solutions
00:53Please boom stick the like button, subscribe if you haven't already, and drop me a comment below with anything that comes to mind
01:01You know what time it is
01:01Let's grow
01:04The US progressive tax system
01:08Before we jump into the new numbers, it's important to understand how the foundation of the US tax system works because a lot of people still get this part wrong
01:16The United States uses a progressive tax system, which means that every taxpayer pays the same rate on the same slice of income regardless of how much they earn for the year
01:27One of the biggest misconceptions I hear is from people that think they got screwed because of a bonus or a raise that pushed them into the next tax bracket
01:36They're worried that all of their income suddenly got taxed at the higher rate
01:41But thankfully, that's not how it works
01:43Only the dollars above the bracket cutoff get taxed at the higher rate
01:48Everything below that line is still taxed at the same lower rate as before
01:53If one person makes $57,000 a year and the person next to him makes a million per year, they both are taxed identically on the first 57,000
02:01We all benefit from the lower brackets on the way up
02:07And that's the beauty about our progressive tax system
02:09Next time you get that year-end bonus, remember it might nudge a portion of your income to the next bracket, but it doesn't retroactively change the rate on what you already earned
02:19And because inflation pushes our wages higher over the years, the IRS adjusts the thresholds of each tax bracket to prevent what is known as bracket creep
02:30That's when inflation alone would otherwise push people to higher tax brackets even though their real buying power hasn't changed
02:35With that foundation in place, let's dive in to the new 2026 tax brackets to see what's changed
02:42Federal tax tables
02:46The income limit increases were a bit all over the map this year
02:49The IRS raised them anywhere from 2.28% to 6.9% with single filers seeing the largest jumps
02:58Let's hop over to my screen and walk through these 2026 tax tables
03:03We'll look at how each of the seven tax brackets shifted and talk about what that means for your income
03:08We bounce out to my spreadsheet and I have a table here for the two most common filing statuses and that's single filers and married filing jointly
03:17And you can see I also have a little standard deduction table here and we'll get there
03:21So we'll begin here with the single filers table and we'll start here with the tax rate
03:26All seven tax brackets remain the same as last year
03:29We have the 10 and 12%, 22 and 24, and 32, 35, and 37
03:33So, it's the same seven brackets
03:38And I should mention that the tax cuts did get extended beyond 2025 with the one big beautiful bill
03:45These are now the standard tax rates indefinitely until the law changes
03:50There's no longer an expiration date, and that is a good thing for us tax filers
03:54So you can see the current year that we're in that we're going to file in early 26 is listed here
04:00And then the new ones that were just announced are the 2026 brackets that we'll file for in early 27
04:07So I have this year's this coming year's and then the percentage change column here
04:13And you can see that single filers in the 10 and 12% bracket got a very nice 6.9% increase
04:18I really do like that the people that need the most help got the biggest bumps
04:24I think that's really important instead of giving more to the people that are already wellto-do
04:30But for single filers, even those of you in the 22 and through the 35% bracket, another very nice jump of 5.1% each with inflation being, I believe, 2.9% in the last calendar year or somewhere right in there
04:47These are very generous increases and they'll make an impactful difference on whether it's just your ordinary income, your Roth conversion strategies, taking income in retirement and things like that
04:57And then jumping down to the married filing jointly, not quite as generous, but still the 10 and 12enters got a nice little increase of about 4%
05:07And that's huge
05:10Again, I think these brackets that have people in more need deserve these higher ones
05:14I do like that
05:14And then we actually came in just under inflation unfortunately from the 22 24 32 and 35% tax brackets
05:23These are the new income thresholds for each marginal tax rate
05:29And then when it comes to standard deductions, single and married got the same measly 2.2% increase
05:34So if you're married filing jointly, it went from 31 12 to 32.2,000
05:42and for single people from 15.7K to 16.1K
05:46And this is essentially your 0% tax bracket
05:49So this comes into effect before you even get to the 10% bracket
05:56In essence, your first 32,000 is taxed at 0% if you're married and then the next 24.8K is taxed at 10%
06:03And then you go up to 100,000 and so on and so forth
06:06So standard deduction is huge because if you don't itemize, which most people don't, this is your 0% tax bracket
06:11And we'll get into that in the example
06:14And then before we get back to the video, I want to show a quick example of the progressive nature of our taxes
06:20And again, this is a 2024 example
06:22I think I used it last year as well
06:24Don't worry about the specific thresholds, but just for logic's sake, a single filer that earned $50,000 back in 2024 would have the following taxes
06:34And again, this is after the standard deduction
06:36So technically the beginning zero, but in that 10% bracket, 11,600 falls in there
06:44And then you pay 12% taxes on earnings above 11.6 but below 47150
06:54And then only that $300 or so gets taxed at that 22%
06:58So, if this person got a $4,000 bonus that pushed them above this tax bracket, everything below still got the nice standard deduction down here, the full 10% and the full 12%
07:11Now that we've covered the federal tax tables, it's time to talk about one of the most important tax aspects for compounding serious long-term wealth, capital gains and qualified dividends
07:25Capital gains are simply the profit that you make when you sell an asset for more than you paid for it
07:32This includes not just stocks and ETFs, but also bonds and cryptocurrency, real estate, cars, boats, collectibles, pretty much any asset that increases in value
07:42There are two types of capital gains: short-term and long-term
07:47To qualify for the lower investorfriendly tax rates, you need a long-term gain
07:53A gain is considered long-term if the asset is held for more than one year before selling
07:58If you sell in less than a year, it's a short-term gain and is taxed as ordinary income at your marginal tax rate
08:05If you're selling for a profit, it often pays to wait for that one-year mark
08:12Long-term capital gains and qualified dividends are once again taxed at 0%, 15%, or 20% depending on your income
08:21Let's hop over and check out the new tables
08:23And much like the federal tax tables, I broke the special tax table, the long-term capital gains into single filers and married filing jointly to cover most of the people watching this video
08:35The 2025 income limit to stay in the 0% tax bracket was 48,350 and that bumped up to 49450, a 2.3% increase
08:48And you can see that same jump for married filing jointly
08:50The 0% bracket went from 96.7 to 98.9
08:53That same 2.3%
08:57So not a big jump
08:57And it looks like the 15% bracket got the same treatment
09:02So anything after 494 up to 545,000
09:09So unless you're a really high earnner, the rest of us normal people fall in the 15% long-term capital gains and qualified dividends tax rate
09:17You know, zero or 15
09:19And then if you make a lot of money, more than 545 if you're single and more than 614 if you're married filing jointly, you bump up to the 20%, which is still a heck of a lot better than the 32 through 37%
09:31These brackets are significantly better per dollar, and we'll see that in the example we dive into later than the federal tax tables
09:41So, those long-term capital gains and qualified dividends really hook you up with some nice savings
09:46You have the standard deduction 32.2 plus 98,900
09:53So, if you make under $130,000, then qualified dividends and long-term capital gains that are tacked on after the federal taxes are covered, we'll be at 0%
10:02That's pretty powerful
10:02One of the most misunderstood facts about this part of the tax code, and focus in here because this one's huge
10:08Long-term capital gains and qualified dividends will not push you into a higher federal income tax bracket
10:16They are considered after your ordinary income, and they're taxed separately from that income that determined your marginal tax rate
10:24Short-term gains are a different story
10:27They're added directly to your ordinary income and they can push you to a higher tax bracket
10:32This is confusing in theory
10:34So, let's look at a simple example to see how this plays out in reality
10:38I'm going to start with my same disclaimer that I do every year in this series
10:41Don't get overwhelmed when you see all this stuff on the screen
10:43It is very simple and we will walk through this step by step
10:47So, for starters, anything on the right side of this line, this stuff over here, these are just screenshots for our reference
10:54Okay? So, these aren't even in all this math and formulas
10:59It's and we'll get there, but we're just going to refer to these as we go
11:03And it is the federal tax table and those long-term capital gains
11:06And I did this example for married filing jointly
11:11So, all the logic is the same
11:11If you're single, the numbers will of course just be smaller and the threshold will be smaller
11:16So, we're going to start by calculating our federal taxes based on your ordinary income
11:22And that's just this stuff up here
11:24So, completely ignore step two down here
11:27Right now, in this scenario, you earned $100,000 from your job
11:32Nice work
11:32We're not retired, so we don't have social security and pension
11:36I just put these in here so you realize these are ordinary income
11:40There's some nuances to social security, but just for all intents and purposes, ordinary income, ordinary income, nonqualified dividends, interest from bonds, non-qualified dividends from stocks and ETFs, um, REITs, things like Q, those kinds of covered calls, etc
11:57Anything non-qualified counts as ordinary income
11:59So, ouch, this does add to our marginal tax rate math here on the thresholds
12:04And then short-term capital gains, same ouchie
12:06So, we take your work income plus all these other incomes and it gets a total ordinary income for the year of $115,000
12:17Now, we're married filing jointly and I didn't copy paste it, but the standard deduction is $32,200
12:25So, we do that in this first step
12:27Ordinary income of 115
12:27Take away that standard deduction
12:30We're not going to itemize
12:31And that leaves us with an ordinary income of $82,800
12:36And then the next step is to calculate our federal taxes based on our ordinary income
12:40The first 24,800 and you can see that here 24,800 is taxed at 10%
12:47So that is $2,480 of taxes paid
12:5224800 * 0.1 and then the rest of it in this case falls in the next tax bracket cuz it's all under 100,800 cuz again that standard deduction cut us below this threshold
13:05So the rest is taxed at 12%
13:07And that is $6,960
13:13When you add these together, your total federal taxes paid on your ordinary income is $9,440
13:20This step is done
13:20And now separately and after the fact, we will consider our qualified income, which is in this case qualified dividends and long-term capital gains
13:33And it looks like we had $50,000 of qualified income
13:37So, we're going to carry that over to here
13:39And now, I highlighted this next part in yellow
13:43You need to pay attention here
13:43The taxes have already been paid on your ordinary income, okay? But you have to drop this amount, the 82,800 of taxable ordinary income down to the capital gain section strictly for threshold calculations
13:59So I need to reiterate, we do not pay more taxes on this
14:04This is strictly being considered because it does count towards the thresholds of qualified
14:09Okay, that's very important
14:11So don't think you're getting tax double on this
14:13I didn't point that out with enough emphasis last year and it confused some people
14:16So strictly for the threshold calculation, we drop down this ordinary income, but the taxes are paid and done
14:23So with that said, it looks like our qualified income of 50,000 and our ordinary taxable income that's already been taxed of $83,000 adds up to $132,800
14:39This is where the ordinary taxable income comes in
14:40You can see that we're on our special tax table, our long-term capital gains and qualified dividends table
14:46The first 98,900 is taxed at 0%
14:49So, we used up 82,800 of that because this does count towards the threshold, but we still have 98.9K minus $82,800 for a total of $16,100 that gets taxed at 0%
15:06So, that's $0 of taxes on 16,100
15:09Now, the rest will fall in the 15% cuz we're obviously well below 613
15:16So, of this 50K, 16,100 was taxed at zero and the remaining 33,900 is taxed at 15% for a total of $5,85
15:30And at first glance, you might think, well, gez, 15% is higher than 10 and 12
15:35I thought ordinary income was worse than qualified
15:38But you have to remember any of this that's above the 100,800 would be taxed at 22% instead of 15
15:43So you basically have roughly 0% instead of 10 or 12 and 15 instead of 22 through 32 and 20% instead of 35 or 37
15:57So the qualified dividends are better, but we just happen to push that next tax bracket that would have been 22%
16:04So, when you take the federal taxes paid on this ordinary income and add it to the capital gains taxes, 5,000, you get a total tax bill of 14,525
16:19And if you're a retiree, you've probably heard that a lot of qualified dividends and long-term capital gains are taxed at 0%
16:25Well, it's true if you think about it for most people
16:28When your work turns to $0 of income and you only have $15,000 of ordinary, that gets wiped out by your standard deduction alone and then all of this and these could be a lot bigger
16:41They could actually be over 100,000 and still fall in the 0% tax range because at that point when you're retired, you don't have your work income filling up the ordinary and dropping down to the thresholds
16:52So, it really is a clear path ahead if you strategize and plan well
16:57Now, that covers the meat, but we still need to hit a few high impact tax nuggets
17:01Important tax tips
17:06Let's talk about something that doesn't come up very often, but when it does, it's a game changer
17:10The primary residence exclusion
17:13If you sell your home, you can exclude up to 250,000 of capital gains if you're single or 500,000 if you're married filing jointly
17:23Most people that sell a home will qualify for this exclusion naturally, but you still need to hit a few basic requirements
17:29You must have lived in the home for at least two of the past 5 years
17:34It must be your primary resident
17:36No secondary homes here
17:38And you can't have used this exclusion on another home sale within the previous two years
17:43Another powerful tool in your tax toolbox is offsetting gains with losses
17:48Let's say you bought stock A and stock B for $5,000 each
17:50You sell stock A for $10,000
17:54That's a nice $5,000 gain
17:57And then you sell stock B, which didn't do as well, for $2,000
18:03That's a $3,000 loss
18:03Your taxable gain is now just $2,000
18:06You were able to use the sale of stock B to offset those gains from stock A
18:11Short-term gains and losses offset each other first, and the same goes for long-term
18:16If there's extra on one side, it can offset the other
18:21And if your capital losses exceed your capital gains, you can carry over up to $3,000 to future tax years
18:27And you can carry this over indefinitely until you use it
18:33So you can use $3,000 per year if you had a $15,000 loss for the next 5 years
18:39The $3,000 limit hasn't changed in decades, which feels ridiculous at this point
18:43But hey, the best tax move of all is still not losing money in the first place
18:48There's a lot more to the tax code, but if you understand the basics that we covered today, you're well on your way to making smart, taxefficient moves in your investing portfolio each and every year
19:01And speaking of smart people making all the right moves that make videos like this one possible, I'd like to give a huge shout out to my brand new channel member, Susie Evans
19:10I appreciate your extra level of support for this channel
19:15And as always, a huge shout out to you channel members that have been here all along
19:18You really do keep my momentum going strong on making these videos and are much appreciated
19:22And check out one of these two videos to continue down your path towards financial freedom
19:29Remember, money is overrated, freedom is not
19:33Thanks for watching and I will see you in the next one
19:35Peace.
