One Way Retirees Could Pay 0% in Capital Gains Taxes
Holding onto stock shares for fear of a big tax bill? Think again. If you can manage your income right, you may not have to pay any taxes at all when you sell.


Could your capital gains bill be lower than you think? Most people are surprised to learn that instead of a uniform rate, there are actually three federal long-term capital gains tax rates:
- 20% if you’re in the top marginal tax bracket of 39.6% (e.g., those filing jointly with incomes of $470,701 and above, or singles making $418,401 and above)
- 15% if you’re in all other tax brackets except the bottom two (e.g., those with taxable incomes of $75,901 to $470,700 for those filing jointly or $37,951 to $418,400 for singles)
- 0% if you’re in the lowest two tax brackets (e.g., taxable income under $75,900 for those filing jointly or $37,950 for singles)
To keep things simple, the rates above ignore the 3.8% net investment income tax that kicks in at higher income levels. We’ll also limit the discussion to securities such as stocks and bonds, since more complicated assets (e.g., rental properties or collectibles) entail additional rules.
Qualifying for the Zero Percent Rate
As you can see, the magic number is $75,900 for couples, with a lower threshold for other filing statuses (Single, Head of Household, etc.). Because capital gains taxes are based upon your taxable income rather than your gross income, more people enjoy the 0% rate than you might think.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For example, assume a retired couple has $90,000 of gross income. If both spouses are over age 65, their standard deduction and personal exemptions total $23,300, bringing their taxable income down to $66,700. This couple would therefore qualify by virtue of being in one of the two lowest tax brackets.
Even if your net worth is high, this still may be applicable to you. Unless you have very high pension income or required minimum distributions, you potentially have a great deal of control over your taxable income. Creating a low-tax year in order to realize long-term gains may be a powerful strategy.
Planning for Retirement
If you’re about to retire and you own appreciated positions, this could be a key piece of an integrated distribution plan.
For example, consider a married couple who retires together at age 62, with $200,000 in low-basis stock. If they defer Social Security benefits and IRA withdrawals, they will have virtually no taxable income (assuming no pension benefits exist). They could sell the stock early in retirement with little or no tax consequences, and live off the proceeds. During that time, their IRAs could continue growing. Best of all, deferring Social Security boosts the monthly payout once those benefits begin. This is a powerful example of how smart planning can simultaneously bolster several aspects of your retirement.
The Details
There’s a limit to the amount of capital gains that qualify for the 0% rate. The 0% rate applies only to the extent you are below the top of the 15% income tax bracket.
For example, assume a married couple has taxable income of $55,900, which is $20,000 below the $75,900 top of the 15% tax bracket. In that event, only the first $20,000 of long-term capital gains would be taxable at 0%. If their taxable income were $35,900, up to $40,000 of long-term capital gains would enjoy the 0% rate. Further gains would be taxed at 15%. If the taxpayer had a large enough gain, eventually some of it would be taxable at 20%. Therefore, if you have a large amount of gains, you might consider spreading any sale out over several tax years.
Another important caveat is if you are receiving Social Security, capital gains can cause a greater percentage of these benefits to be subject to income taxes. So, even if you pay no capital gains taxes, these gains may cause your taxes to increase in other ways. Be sure to include your tax adviser in the process, or run your own calculations.
Asset-Allocation Implications
Capital gains tax treatment only applies to stocks held outside of retirement accounts. Therefore, in retirement, you might want to tilt your stock allocation higher in your non-retirement accounts. To keep your overall asset allocation intact, you could increase your bond allocation accordingly in your retirement accounts (IRAs, 401(k)s, etc.).
As an added bonus, the long-term capital gains tax rates discussed above apply to qualified dividends as well. Those who plan well could enjoy a significant increase in their spendable income.
Bottom Line
If you’re holding onto a stock simply because you don’t want to trigger capital gains taxes, you might be able to have your cake and eat it too.
The 0% long-term capital gains rate is just one of many ways retirees with a well-planned distribution strategy can get more from their money. As always, keep your CPA and other advisers involved to ensure a coordinated effort on all fronts.
Yoder Wealth Management does not provide tax advice.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Michael Yoder, CFP®, CRPS®, writes about issues affecting retirees and those transitioning into retirement. He is Principal at Yoder Wealth Management (www.yoderwm.com), a Registered Investment Advisor. 2033 N. Main St., Suite 1060, Walnut Creek, CA 94596. 925-691-5600.
-
Last Call for Fortnite Refunds: Parents Can Still File a Claim
The FTC is sending out $126 million in refunds to families whose kids were charged for unwanted items in Fortnite — and there’s still time to file a claim.
-
Stock Market Today: Stocks Swing as Trump Scraps Canada Trade Talks
Despite a mid-afternoon slip, the S&P 500 and Nasdaq ended the day at new record highs.
-
Why Smart Retirees Are Ditching Traditional Financial Plans
Financial plans based purely on growth, like the 60/40 portfolio, are built for a different era. Today’s retirees need plans based on real-life risks and goals and that feature these four elements.
-
To My Small Business: Well, I've Been Afraid of Changin', 'Cause I've Built My Life Around You
While thinking about succession planning might feel like anticipating a landslide (here's to you, Fleetwood Mac), there are strategies you can implement to manage the uncertainty and the transition.
-
These Are the Key Tariff Issues to Watch in Coming Months
While they're not dominating headlines right now, tariffs are not over. Some key dates are coming up fast that could upend markets all over again.
-
Technology Unleashes the Power of Year-Round Tax-Loss Harvesting
Tech advancements have made it possible to continuously monitor and rebalance portfolios, allowing for harvesting losses throughout the year rather than just once a year.
-
The Fiduciary Firewall: An Expert's Five-Step Guide to Honest Financial Planning
Armed with education and awareness, you can avoid unethical people in the financial industry by seeking fee-only fiduciaries and sharing your knowledge with others.
-
How Private Capital Could Be the Key to Rebuilding America
Private capital investment in infrastructure could be a more efficient and effective alternative to government funding, potentially stimulating the economy during uncertain times, creating jobs and delivering projects on time and within budget.
-
Real Estate Bridge Funds: An Expert Guide to Investing in a Volatile Market
Investors looking for passive income are buying into these funds, which offer capital to borrowers for short-term financing.
-
Bill Bought a Fridge, and Then His Nightmare Began
A Lowe's customer reached out to me after he encountered the retailer's 48-hour return window for major appliances when his brand-new fridge turned out to be defective.