The article discusses tax gain harvesting, a strategy allowing individuals to sell appreciated assets during low-income years to minimize taxes on capital gains. Unlike tax loss harvesting, which involves selling assets at a loss, tax gain harvesting can enable investors to sell assets without incurring federal taxes if their taxable income is below specific thresholds (e.g., $49,450 for individuals in 2026). This strategy allows for a reset of the asset's cost basis, lowering future taxable gains. It's particularly beneficial for retirees or those experiencing reduced income. Wealth management platforms are starting to utilize this technique, especially for custodial accounts for children, while cautioning about potential state tax implications. Experts recommend consulting tax professionals for personalized advice.

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How to sell appreciated assets without a big tax bill now and later

Portrait of Medora Lee Medora Lee

USA TODAY

July 22, 2026, 5:05 a.m. ET

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Tax loss harvesting is a popular way many Americans lower their taxes each year, but meet its less popular but powerful sibling, tax gain harvesting.

Tax gain harvesting is strategically selling assets that have increased in value to minimize future taxes. It’s the opposite of tax loss harvesting, which is selling underwater assets to apply losses against capital gains or up to $3,000 of ordinary income each year.

Using tax gain harvesting during low-income years could allow you not only to escape tax on those gains but permanently lower taxes you might have to pay later on the same investment if you buy it back and it appreciates further, experts said. Tax gain harvesting isn’t subject to the wash-sale rule that tax loss harvesting is that prevents you from immediately buying back the same investment.

The strategy’s “compelling, especially in lower income years, like if you lose a job or in early retirement bridge years, before Social Security kicks in and before RMDs (required minimum distributions),” said Emily Shacklett, certified public accountant and wealth adviser and managing director at Hightower Signature Wealth. “You may have lean income years, and those are phenomenal times of life to recognize capital gains.”

How can tax gain harvesting benefit you?

“In a year when your taxable income falls below a certain level, long-term capital gains are taxed at a federal rate of 0%,” said Kevin Knull, chief executive of TaxStatus, provider of IRS-sourced financial data to professionals. “Investors in that position can deliberately sell appreciated stock or fund shares, pay nothing in federal tax on the gain, and buy the same investment right back.”

In 2026, individuals with up to $49,450 in taxable income or married filing jointly with taxable income up to $98,900 pay the 0% federal capital gains rate. The layering in of the standard deduction, or deductions if you are an older adult, also helps keep your taxable income down.

Here’s how it could work, Knull said:

Consider a married couple, both age 67 and retired in 2026, living on $70,000 a year from a pension and IRA withdrawals. They also hold a stock fund in a regular brokerage account that they bought years ago for $50,000 and is now worth about $126,400.


Pension and IRA income	$70,000
Standard deduction (married, both 65 or older)	- $35,500
Senior deduction ($6,000 per person, 2025 through 2028)	- $12,000
Taxable income before any stock sales	$22,500
Top of the 0% capital gains bracket (2026, joint filers)	$98,900
Long-term gains they can realize at a 0% federal rate	$76,400

Because their taxable income starts at $22,500, this couple can sell the entire fund, realize a $76,400 long-term gain, and owe zero federal tax on it. Their total taxable income lands exactly at the $98,900 top of the 0% bracket.

If they buy the fund back the same day, their cost basis, or purchase price, resets from $50,000 to $126,400, which helps them lower taxable appreciation later. Their income also stays below the levels that would reduce the temporary senior deduction or trigger Medicare surcharges, But state income tax may still apply depending on where they live.

The newer senior deduction phases out when modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers, the IRS said. Medicare surcharges begin when individual MAGI reaches $109,000 and $218,000 for joint filers, according to the Centers for Medicaid and Medicare Services.

For all these reasons, “tax gain harvesting is the reverse (of tax loss harvesting), and for many retirees, it is the more valuable of the two,” Knull said.

Roger Williams University Professor Michael Melton motions to the Bloomberg Terminals in his classroom, where students manage investment portfolios.

Not just for grownups

Tax gain harvesting is best when income is low or zero, making children ideal for this strategy, according to investment platform Wealthfront.

Wealthfront launched custodial accounts last month that automatically sell appreciated investments annually to realize gains while the child is in a low or 0% federal tax bracket, then buying replacement Exchange-Traded Funds to maintain the portfolio’s target risk and returns. The subsequent, higher purchase price increases the investment’s cost basis, which reduces the amount of realized gain when the investment is sold later.

“This is definitely an interesting concept, and we’ve employed it with some clients with custodial accounts, but not an auto pilot because of worries around the kiddie tax,” Shacklett said.

The kiddie tax is an IRS rule that taxes a child's unearned income such as interest, dividends, and capital gains beyond a certain threshold at their parents' marginal tax rate rather than the child's lower rate. It’s meant to prevent shuffling money to kids to avoid higher tax rates.

To counter that, Wealthfront only realizes up to $1,350 in tax-free growth each year so no federal tax is due and no return is required. A child needs to file a tax return if annual unearned income such as interest, dividends and capital gains reaches $1,350 because amounts above that are taxed at the child’s lower marginal tax rate. Amounts above $2,700 are taxed at the parents’ marginal rate.

“It’s not a bad idea, but keep your hand on the pulse of it,” Shacklett said.

Are there any cons to tax gain harvesting?

Tax gain harvesters must consider state taxes, experts said. Most states tax capital gains, with rates ranging from 0% to more than 13%. California taxes capital gains at the same rate as income.

“So, basically, the (zero tax) strategy works for federal purposes due to the 0% rate and in states with no income tax…or exempts capital gains,” said Richard Pon, a certified public accountant in San Francisco.

Wealthfront’s automated tax gain harvesting in its custodial accounts is set to avoid triggering state tax filing requirements, but “it’s important to note state and local tax laws vary significantly and may impose different or additional requirements beyond federal rules,” said Alex Michalka, Wealthfront's vice president of investment research. “So, it’s always wise to consult with a tax professional regarding the specific tax implications for your situation.”

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.

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