Tax Strategy · Gain Harvesting

Tax-gain harvesting:
realizing gains at 0%.

READ5 min · UPDATED2026-05-16

Reviewed against primary sources cited at the bottom of this page.

In a year when your income is low enough, you can realize long-term capital gains at 0% federal tax. This page covers when to do it, how to calculate your window, and why it is especially valuable for early retirees and career-transition years.

This page covers US-specific accounts and tax law. Outside the US? The priority order is the same, the account names differ (ISA in the UK, TFSA/RRSP in Canada, Super in Australia, etc.).

THE SHORT VERSION

If your taxable income including gains stays under $49,450 (single 2026) or $98,900 (MFJ), you pay 0% on long-term capital gains. In a low-income year, early retirement, a career gap, a business loss, intentionally realizing gains at 0% resets your cost basis higher with no tax cost. Unlike losses, there is no wash-sale rule on gain harvesting: sell and immediately rebuy.

The two-stack model: how LTCG actually stacks on ordinary income

Most retail investors model US federal tax as a single ladder. It is two parallel ladders. Ordinary income (wages, interest, short-term gains, traditional IRA withdrawals) runs up one set of brackets. Long-term capital gains and qualified dividends run up a separate set of brackets, but they stack on top of the ordinary-income tower. The position of your LTCG inside its own bracket depends on how much ordinary income already filled the space below.

STACK 1 · ORDINARY INCOME

Wages, interest, short-term gains, non-qualified dividends, traditional 401(k) and IRA withdrawals, Roth conversions.

10% · up to $12,150 (single 2026)
12% · up to $49,450
22% · up to $105,725
24% · up to $201,775
32% · up to $256,225
35% · up to $640,600
37% · above $640,600

STACK 2 · LTCG / QUALIFIED DIVIDENDS

Long-term capital gains (held >1 year) and qualified dividends. Stacks on top of ordinary income; its bracket position depends on what ordinary income filled below.

0% · taxable income up to $49,450 (single 2026)
15% · up to $545,500
20% · above $545,500
+3.8% NIIT · above $200K MAGI (single)

2026 thresholds shown are inflation-indexed projections. Confirm at the IRS Rev. Proc. for the year before relying on the exact dollar amount. Standard deduction (2026): $16,100 single / $32,200 MFJ.

Worked example 1: $60,000 of LTCG, no other income

SCENARIO A · $0 ORDINARY INCOME, $60,000 LTCG

Standard deduction (single 2026): $16,100. Drops gross to $43,900 taxable.
$43,900 sits entirely under the $49,450 LTCG 0% ceiling.
Federal tax: $0.

You realize $60,000 of long-term gains and the IRS takes nothing. State tax may still apply depending on residency; see Bitcoin state taxes for the no-state-income-tax map.

Worked example 2: same $60,000 LTCG, stacked on $50,000 wages

SCENARIO B · $50,000 WAGES + $60,000 LTCG

$50,000 wages − $16,100 standard deduction = $33,900 ordinary taxable income. That fills the bottom of Stack 1.
$60,000 of LTCG stacks on top, starting at $33,900 and ending at $93,900 of total taxable income.
The $49,450 LTCG 0% ceiling is reached when LTCG has used $15,550 of its capacity. The remaining $44,450 of LTCG is taxed at 15%.
Federal tax on the LTCG: ~$6,668 (plus the ordinary-income tax on the wages).

Same $60K sale. Adding $50K of W-2 wages converted ~$45K of LTCG from 0% to 15%. The marginal cost of taking the $50K W-2 job is not just the headline 22% on the wages themselves, it is the wages tax plus the LTCG you can no longer harvest at 0%. That is the real marginal cost, and it is rarely visible on a paystub.

The strategy that falls out

Once you see the two stacks, three plays open up in any low-income year:

Tax-gain harvest BTC up to the 0% LTCG ceiling. Sell, immediately rebuy (no wash-sale rule on gains verify×DON'T TRUST, VERIFYClaim: IRC §1091 wash-sale rule applies to losses only, not to gains.Verify at: 26 USC §1091 ↗ · IRS Pub 550 ↗Statute disallows losses; gains are simply realized at the new basis.), reset cost basis higher for $0 federal. Especially valuable in pre-move years to a no-income-tax state (TX, FL, NV, WA, TN, SD, WY, NH).
Roth-convert traditional IRA balances up to the top of the 12% bracket. The same low-bracket space that the 0% LTCG uses is the same space where you can fill the 12% bracket with Roth conversions. Money you Roth-convert at 12% is never taxed again. Coordinate carefully, both strategies compete for the same dollar of room.
Realize STCG / harvest losses where they reduce the wages-plus-LTCG combined position. Net capital losses absorb up to $3,000 of ordinary income per year (single or MFJ) with the remainder carrying forward indefinitely verify×DON'T TRUST, VERIFYClaim: Net capital losses offset up to $3,000 of ordinary income per year; remainder carries forward indefinitely.Verify at: IRS Pub 550, Topic 409 ↗Statute is IRC §1211(b). Verify against current Pub 550..

See Roth conversion ladder for the multi-year sequencing and 2026 tax brackets for the full bracket table.

The mechanics

2026 long-term capital gains 0% bracket verify×DON'T TRUST, VERIFYClaim: 2026 LTCG 0% bracket tops approximately $49,450 single, $98,900 MFJ (inflation-indexed projection).Verify at: IRS Topic 409 ↗Indexed annually. Exact figures in annual Rev. Proc.:

Single: up to roughly $49,450 taxable income
Married filing jointly: up to roughly $98,900 taxable income

"Taxable income" here means after standard deduction. A single person with $65,550 in ordinary income, minus the $16,100 2026 standard deduction, has $49,450 taxable, right at the 0% LTCG threshold. They could realize some long-term capital gains and pay 0% federal tax on them.

When to use this

EARLY RETIREMENT

Before Social Security claim. Income is low. Roth conversions and gain harvesting compete for the same low-bracket space. Coordinate carefully.

CAREER TRANSITION YEAR

Lower income = lower brackets. Intentionally sell appreciated positions and rebuy. Higher cost basis for future years at no tax cost.

BUSINESS LOSS YEAR

Net operating loss reduces AGI significantly. Window for 0% gains may open even if normal income is higher.

SABBATICAL

Extended time off. Income drops. Strategic window opens.

The realization process

Sell the appreciated position. Realize the gain.
Immediately rebuy the same fund (or very similar).

No wash-sale rule on capital gains. Wash sale only applies to losses verify×DON'T TRUST, VERIFYClaim: The wash-sale rule under IRC 1091 applies to losses, not gains. Selling at a gain and rebuying immediately has no tax penalty.Verify at: IRS Publication 550 ↗Section 1091 covers wash sales. Applies to disallow loss deductions.. You can sell and immediately rebuy the exact same fund when harvesting gains.

Result: same investment position, new higher cost basis, $0 tax if within the 0% bracket, reduced future capital-gains liability when you eventually do sell.

Bitcoin-specific application

Long-term Bitcoin gains in a low-income year: sell some, immediately rebuy, new cost basis at current price, no tax if within the 0% bracket.

This is one reason timing matters enormously. The same gain that costs 20% in a high-income year costs 0% in a low-income early-retirement year. See Bitcoin Taxes and Social Security Strategy for the interaction with delaying SS to age 70.