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Financial Basics · Tax Concepts

Capital Gains

A capital gain is the profit from selling an investment for more than you paid. Short-term gains (held ≤1 year) are taxed at ordinary income rates; long-term gains (>1 year) get preferential rates of 0%, 15%, or 20%.

By the TRRP Editorial TeamUpdated 2026SSA · IRS · CMS data

Definition

A capital gain is the profit from selling an investment for more than you paid. Short-term gains (held ≤1 year) are taxed at ordinary income rates; long-term gains (>1 year) get preferential rates of 0%, 15%, or 20%.

Why it matters in retirement

Long-term capital gains are one of the most powerful tools in the retirement tax code. For many couples, the 0% LTCG bracket means gains can sometimes be harvested at a 0% federal rate — but only if you understand how it stacks with ordinary income.

Key numbers · 2026
0% LTCG top (MFJ 2026)
$98,900
15% LTCG top (MFJ)
$613,700
NIIT threshold (MFJ)
$250,000
Wash sale window
30 days
Pros
  • Lower rates than ordinary income
  • 0% bracket for moderate incomes
  • Step-up in basis at death eliminates gains
  • Can offset losses against gains
Cons
  • Stacks on top of ordinary income
  • NIIT adds 3.8% above $250K (MFJ)
  • Wash sale rule blocks tax-loss harvesting shortcuts
  • State taxes may treat gains as ordinary

Common mistakes

  • Realizing short-term gains when a 2-week wait makes them long-term
  • Missing the 0% bracket by converting too much to Roth same year
  • Violating the wash sale rule with tax-loss harvesting
  • Forgetting that qualified dividends share the LTCG brackets
The part most people miss

In early retirement before Social Security starts, a couple with modest interest income can often realize $60K–$80K of long-term gains completely tax-free by staying in the 0% bracket. This is the "tax gain harvesting" opportunity that disappears the moment Social Security turns on.

When you’re ready

Want help applying capital gains to your situation?

Start with the free Retirement Readiness Score to see where you stand, then talk to a fiduciary if you want a second set of eyes. No pitch, no pressure.

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