The federal tax map for investors is changing in 2026, with higher income thresholds for long-term capital gains brackets. The shift could let more households sell investments at a 0% federal rate. Advisors say the update may influence retirement withdrawals, rebalancing moves, and the timing of major sales in the year ahead.
The IRS raised the capital gains brackets for 2026. Here is how much investors can make and still pay 0% capital gains taxes.
The change reflects routine inflation indexing. Long-term capital gains are taxed at 0%, 15%, or 20% depending on taxable income. When thresholds rise, more gains can be taxed at lower rates. That creates planning openings for retirees, early retirees with flexible income, and investors with capital losses to offset gains.
How the 0% capital gains bracket works
The 0% rate applies to long-term gains on assets held for more than a year. Eligibility depends on taxable income after deductions. The tax code stacks long-term gains on top of ordinary income. That means wages, interest, and withdrawals fill the lower tiers first. Remaining room in the 0% tier can absorb long-term gains with no federal tax.
Marital status and filing choice also matter. Joint filers have higher thresholds than single filers. Heads of household fall in between. The new 2026 brackets lift these thresholds, which may allow larger tax-free sales for some households.
Why 2026 is a key year
Indexing raises the capital gains thresholds each year. But 2026 also brings broader tax changes as earlier provisions expire or reset. Investors weighing stock sales, real estate dispositions, or business interests may face a different mix of ordinary income brackets and deductions. The move up in capital gains thresholds adds another variable to that picture.
For many retirees, the 0% bracket can help bridge years before Social Security or required distributions increase income. Taxable investors can pair the higher thresholds with loss carryforwards, charitable gifts, or qualified dividends planning to manage their bill.
Planning moves to consider
The higher thresholds do not guarantee a zero bill. Medicare surtaxes, state taxes, and other income can still apply. Still, a careful plan can make use of the wider 0% tier.
- Harvest gains in low-income years to raise cost basis without federal tax.
- Coordinate Roth conversions and gains so one does not crowd out the other.
- Time large sales across calendar years to stay in a lower bracket.
- Use charitable donations of appreciated stock to avoid gains and claim deductions.
- Place income-heavy assets in tax-deferred accounts and growth assets in taxable accounts.
Who benefits—and who should be cautious
Households with modest taxable income and sizable unrealized gains stand to gain the most. Early retirees and part-time workers often have the flexibility to control income. The higher thresholds can also help families funding education or a home purchase by selling appreciated investments in stages.
High earners may see little change if their taxable income remains above the 15% breakpoint. They should still weigh the 3.8% net investment income tax, state levies, and phaseouts. Investors receiving large bonuses, selling a business, or exercising stock options could be pushed out of the 0% bracket even with the 2026 lift.
What to watch next
Final IRS tables will set the exact income cutoffs for each filing status. Advisors recommend running projections that stack ordinary income, deductions, dividends, and planned sales. That view shows how much room remains in the 0% tier and how close a household is to the 15% threshold.
The coming year offers a window to test small transactions before committing to large sales. Investors can also adjust withholding or estimated payments to avoid penalties when realizing gains.
The 2026 increase in capital gains brackets widens the path for strategic selling. The main takeaway is simple. Map your income by calendar year, measure room in the 0% tier, and pace sales accordingly. With clear planning, more gains can land in the lowest possible bracket while aligning with long-term goals.
