Taxable brokerage accounts in retirement: gains, dividends and cost basis

Of the accounts you'll draw from in retirement, the taxable brokerage account is the one most people understand least — there's no "traditional" or "Roth" label, just a balance. But what you owe when you sell depends on one number that isn't on the balance: your cost basis. Runway asks for it on the Accounts step, and here's why it matters.

What is cost basis?

The IRS puts it simply: "Generally, an asset's basis is its cost to the owner." For shares you bought, that's generally what you paid. If you received the asset as a gift or inheritance, different rules apply — the IRS points to Publication 551. Your brokerage's statements and its cost-basis report show the figure; it's worth having it ready before you start selling.

How is the gain taxed?

The holding period decides which rate applies. Per 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 get the lower 0%, 15% and 20% rates; short-term gains are taxed like wages. The 2026 thresholds for the 0% and 15% rates are in the capital gains guide. Here's what that means for a married couple, both 65 or older, with $60,000 of other income, who sell $100,000 of investments:

Same $100,000 sale, very different bills: what you owe tracks the gain, not the amount. And the rate depends on what else you earned that year. Put the $90,000 gain on top of $200,000 of other income and the tax becomes $15,020 — which includes a $1,520 surtax explained below. If the same $90,000 gain were short-term, taxed as ordinary income on top of that $60,000, it would cost $12,164 instead of $2,340.

What about dividends and interest?

Dividends arrive whether or not you sell. The IRS says "qualified dividends are those dividends that qualify to be taxed at lower capital gain rates" while "ordinary dividends are included in ordinary income" (Topic no. 404); your Form 1099-DIV shows which is which. Interest from cash or bonds is ordinary income. Runway's engine does not separately model yearly dividend and interest income from taxable accounts — it taxes the gain when you sell — so for a taxable account that pays meaningful income, treat Runway's tax figures as a floor.

What is the 3.8% surtax?

Higher-income households owe a net investment income tax. The IRS: "A 3.8 percent net investment income tax (NIIT) applies to individuals, estates, and trusts," once modified adjusted gross income passes $250,000 for married filing jointly or $200,000 for single filers (Topic no. 559). It applies to the lesser of your net investment income or the amount over the threshold. In the $200,000-plus-$90,000 example above, income reaches $290,000, $40,000 over the line, so the tax is 3.8% of $40,000 = $1,520.

How does Runway handle taxable accounts?

You enter a balance and a cost basis. Runway assumes each withdrawal is a proportional slice, so the share of every sale that's gain is one minus basis divided by balance. In the sample household's brokerage account — $350,000 with a $210,000 basis — 40% of each sale is gain. In the first year the plan sells $60,917, of which $24,367 is taxable gain, and the federal tax is $0 because that gain lands in the 0% bracket. The withdrawal order matters here too; the Withdrawal Plan page labels every step with the reason it was chosen. Your real gain depends on which shares you actually sell, so treat the engine's figure as a planning estimate.

How were these numbers computed?

The tax table uses Runway's 2026 federal calculation for a married couple filing jointly, both 65 or older (standard deduction $32,200 plus $1,650 each for age 65+), with $60,000 of other ordinary income unless noted. "Tax on the sale" is the tax with the sale minus the tax without it. Brackets and the 0%/15% capital-gains thresholds are from IRS Revenue Procedure 2025-32; the surtax rate and thresholds are from IRS Topic 559.