How to leverage higher income limits for the 0% capital gains bracket

The earnings limit for the 0% capital gains bracket will rise in 2025, which could offer tax planning opportunities, financial experts say.

At sale, profitable assets owned for more than one year qualify for lower taxes — known as long-term capital gains. Those rates are 0%, 15% or 20%, depending on taxable income.   

The IRS this week unveiled inflation adjustments for 2025, including higher taxable income limits for the 0% capital gains bracket.

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Starting in 2025, single filers qualify for the 0% long-term capital gains rate with taxable income of $48,350 or less, while married couples filing jointly are eligible with $96,700 or less.

You could qualify for the 0% bracket with higher earnings than you expect. The taxable income formula subtracts the greater of the standard or itemized deductions from your adjusted gross income.

Here’s what investors need to know about planning around the 0% capital gains bracket, according to financial experts.

If you’re sitting on profitable investments, the 0% capital gains bracket could offer a chance for “tax gain harvesting,” said certified financial planner Ashton Lawrence, a director at Mariner Wealth Advisors in Greenville, South Carolina.

Here’s how it works: Investors in the 0% capital gains bracket can strategically sell profitable brokerage account assets without triggering capital gains taxes.

You can then repurchase the same assets to “reset your cost basis,” or original purchase price, to save on future taxes, Lawrence said.

You can also leverage the 0% capital gains bracket to rebalance brokerage account assets without triggering a tax bill, experts say. You rebalance by purchasing and selling assets to reach a target mix of assets based on your goals and risk tolerance.

With the stock market up significantly in 2024, investors should “take some of those gains off the table” before 2025, said George Gagliardi, a CFP and founder of Coromandel Wealth Management in Lexington, Massachusetts. 

“The S&P 500 and some of its largest companies have all seen substantial gains the past few years,” he said. But “markets don’t go up forever” and current gains could become losses. Rebalancing can help reduce portfolio risk amid future volatility, depending on your goals and timeline.

While the 0% capital gains bracket could save you money, you’ll need to fully estimate your income, which includes assets you plan to sell.

“It’s crucial to project your entire tax situation with and without the capital gains,” said Dallas-based CFP Brandon Gibson, wealth manager at Gibson Wealth Management. “Don’t just do rough math based on the capital gains brackets.”

Plus, boosting your income can trigger other “tax side effects,” such as higher Social Security taxes, increased Medicare premiums or eligibility for marketplace health insurance subsidies, he said.