Learn how capital-gains harvesting lets retirees pay 0% tax on investment profits. Discover when it makes sense, who qualifies, and how to coordinate it with other tax strategies.
Capital-gains harvesting is one of the few times you can sell investments, pay little to no tax, and improve your future tax picture.
When timed correctly, this strategy helps retirees reset cost basis, rebalance portfolios, and reduce lifetime taxes.
Most retirees try to avoid paying taxes — but sometimes, realizing income on purpose is the smartest move you can make.
That’s the idea behind capital-gains harvesting.
Instead of deferring gains indefinitely, you intentionally sell appreciated investments during low-income years, pay little (or nothing) in tax, and immediately reinvest.
You end up in the same market position — but with a higher cost basis and lower future tax bill.
It’s not about timing the market.
It’s about timing your income.
Whenever you sell an investment in a taxable account for more than you paid, you realize a capital gain.
If you’ve held the investment for more than a year, it’s a long-term capital gain, which enjoys lower tax rates.
Capital-gains harvesting means realizing those gains intentionally — especially in years when your income is low enough to keep the tax rate on those gains at 0%.
Then, you can immediately repurchase the same (or a similar) investment.
Unlike losses, there’s no “wash-sale rule” for gains.
Let’s say you bought $20,000 of a broad-market ETF several years ago that’s now worth $35,000.
Later, when you eventually sell again, you’ll owe tax only on gains above that higher basis.
Here’s where the opportunity gets interesting.
For 2025, the 0% capital-gains bracket applies up to these approximate taxable-income thresholds:
For Married Filing Jointly:
For Single Filers:
(Exact numbers adjust annually with inflation.)
Another way to think about it:
If you're in the 12% federal marginal tax bracket or below, your long-term capital gains are taxed at 0%.
That makes the 12% bracket a critical planning threshold — stay within it, and you can realize gains tax-free while still having room for other income sources like dividends, interest, or small IRA withdrawals.
Key takeaway:
If your taxable income (after deductions) is below those thresholds, your long-term capital gains are taxed at 0%.
That means a retiree couple could have well over $100,000 of total gross income — once you add the standard deduction — and still pay zero federal tax on long-term gains.
This strategy works best in the gap years between retirement and RMDs or Social Security — when your taxable income is temporarily low.
Here are the most common opportunities:
Done right, harvesting gains can help you reset your cost basis, avoid “tax bombs” later, and simplify portfolio withdrawals in your 70s and 80s.
There are times when harvesting gains can actually hurt more than help:
Like all tax strategies, context matters.
Meet Carol and David, ages 63 and 61.
They retired two years ago after Carol left her role as a school administrator and David stepped away from his small business. They're now living on about $75,000/year from savings, and they don't plan to claim Social Security until age 70.
They have:
Traditional IRAs: $850,000 (Tax-deferred)
Roth IRAs: $180,000 (Tax-free)
Taxable brokerage: $400,000 (Mixed stock/bond ETFs)
Cash: $60,000 (Emergency fund)
Their brokerage account includes a handful of low-cost index funds they've held for over a decade — some with significant unrealized gains. One fund alone has grown from $50,000 to $95,000.
Carol worries about future taxes. David wants to rebalance but hesitates to sell anything because "we'll get hit with capital gains."
That's when they learn about capital-gains harvesting — and realize this is the perfect time to act.
After deductions, their projected taxable income is about $70,000 — safely within the 0% capital-gains bracket for joint filers.
They sell $20,000 of long-term gains from an appreciated ETF position.
Because they’re under the 0% limit, they owe no federal tax on the sale.
They immediately reinvest in a similar low-cost ETF, keeping their allocation intact but resetting cost basis.
Capital-gains harvesting is a low-risk, high-reward maneuver when used at the right time.
It can help retirees:
“You can’t control the market — but you can control to a degree when you pay taxes.”
At Ignite Financial, we help retirees build multi-year tax maps to coordinate Roth conversions, RMDs, and capital-gains harvesting for lasting tax efficiency.
See our article on 7 ways to Lower Taxes in Retirement
You’ve saved and invested for years.
Now it’s time to make those investments work after taxes.
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That depends on your taxable income.
For 2025, married couples can realize roughly $94,000 of taxable income (including the gains) before paying any federal long-term capital-gains tax.
No.
The 30-day wash-sale rule applies only to losses, not gains.
You can sell and buy the same security immediately.
Usually annually during low-income years (often before RMDs or Social Security).
Many retirees check this each fall, after estimating year-end income.
Yes — some states tax long-term gains even if the federal rate is 0%.
However, Iowa no longer taxes retirement income or most investment gains, giving local retirees an extra advantage