Tax-Gain Harvesting: When Realizing Gains Can Reduce Future Taxes

Tax loss harvesting is a common strategy to help mitigate taxes. It is selling an investment at a loss to capture the loss on paper to offset any realized gains.

Tax gain harvesting, while not as common, can also be a useful strategy to save on taxes.

Tax gain harvesting is selling an investment at a gain while in a favorable tax bracket. Specifically the 0% long term capital gains bracket.

In 2026 the 0% capital gains rate applies to married filing joint with income from $0 - $98,900.

For example, let's take a married couple over the age of 65. Normal Standard Deduction: $35,200 Over age 65 additional deduction: $12,000 Income: $100,000 Taxable income: $52,500

The 0% Capital Gains bracket goes up to $98,900 of income, meaning there is room to sell up $46,400 of capital gains at a 0% rate.

Upon doing so, if you do not need the cash right then, you can repurchase the stock and reset your cost basis at the higher level.

For example, let's say you bought a stock at $10. It is now worth $20. You sell that position and re-buy the stock, now your new cost basis is $20 instead of $10 and you didn't pay any tax.

This helps avoid higher capital gains tax rates that range from 15% to as high as 23.8%

Things to consider: Impacting social security: Realizing capital gains (additional income) can affect the taxation of social security benefits for retirees Step up in basis: If assets are held until death, your cost basis is reset upon death. Meaning your beneficiaries will receive your assets at a cost basis at the current value upon death, not the original cost basis that you paid for that asset. So this strategy may not have an impact in that scenario