Capital gains in retirement: the 0% bracket and how to use it
For many retirees the cheapest dollar of income isn't a Roth conversion or an IRA withdrawal — it's a long-term capital gain. Below a certain income, the federal tax on those gains is zero. Runway's withdrawal plan accounts for it; this post shows how much room it gives you and where it runs out.
What is a long-term capital gain?
A gain on an asset you held more than a year. The IRS: "If you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term" (Topic no. 409). Long-term gains are taxed at 0%, 15% or 20% by income; short-term gains are taxed like wages. How the gain is figured from your cost basis is covered in our taxable accounts guide.
What are the 2026 thresholds?
IRS Revenue Procedure 2025-32 lists the 2026 "maximum zero rate amount" and maximum 15% rate amount by filing status:
| Filing status | 0% up to (taxable income) | 15% up to |
|---|---|---|
| Married filing jointly | $98,900 | $613,700 |
| Single | $49,450 | $545,500 |
| Head of household | $66,200 | $579,600 |
Above the 15% limit the rate is 20%. The thresholds apply to taxable income — after the standard deduction ($32,200 joint, plus $1,650 for each spouse 65 or older) — which is why retirees with modest income have more room than the headline number suggests.
How much gain fits in the 0% bracket?
Gains sit on top of ordinary income: the ordinary income fills the bottom of the taxable-income stack first, then gains are taxed at the rate for wherever they land. Runway's engine, for a married couple (both 65+; deduction $35,500), finds how much long-term gain they can realize before any tax appears:
| Other (ordinary) income | Long-term gain at 0% |
|---|---|
| $0 | $134,400 |
| $30,000 | $104,400 |
| $50,000 | $84,400 |
| $70,000 | $64,400 |
| $90,000 | $44,400 |
| $110,000 | $24,400 |
Each extra dollar of ordinary income removes a dollar of room — the 0% space is $98,900 of taxable income plus the $35,500 deduction, minus whatever your other income uses. And when gains do cross the line, the extra is taxed at 15%: with $90,000 of ordinary income, a $60,000 gain costs $2,340 and a $100,000 gain costs $8,340.
How can I use the 0% bracket?
- Spend from taxable accounts in low-income years. This is what Runway does in the sample plan: the first year's withdrawal comes from cash and then from the brokerage account, producing $24,367 of gain and $0 of federal tax.
- Realize gains on purpose. Selling an appreciated investment up to the top of the 0% bracket resets its cost basis higher, shrinking future gains. The tax saved is real; the trade-off is that you give up the deferral.
- Mind the neighbors. A gain raises your modified adjusted gross income, which feeds Medicare's IRMAA, the ACA subsidy, and how much of your Social Security is taxed. "0% federal capital gains tax" is not "free" if the gain pushes income over one of those lines.
The same bracket interacts with Roth conversions: converted dollars are ordinary income and consume the same room. The tax brackets guide shows how the layers stack.
See which years have 0% room. Runway shows the gain, the bracket and the tax for every withdrawal — free to start.
Try the plannerHow were these numbers computed?
Thresholds and the standard deduction are from IRS Revenue Procedure 2025-32 (2026). The room table is Runway's federal tax calculation for a married couple filing jointly, both 65 or older, solving for the largest long-term gain that produces no capital-gains tax at each level of ordinary income; state tax is not included. The $24,367 example is the sample household's first projected year.