Capital Gains Archives - Good Life Wealth Management

Capital gains taxes can significantly reduce your after-tax retirement income if left unmanaged, especially for investors with $500,000–$5 million in investable assets. This article explains nine effective strategies to manage capital gains — with a focus on long-term planning, tax efficiency, and coordination with broader retirement income goals.

1. Know the 2026 Capital Gains Tax Brackets

Capital gains are taxed differently based on how long you hold an investment:

Short-term gains (assets held ≤ 1 year): taxed as ordinary income
Long-term gains (assets held > 1 year): taxed at preferential rates

For 2026, long-term capital gains rates are:

Rate	Single	Married Filing Jointly
0%	Up to ~$49,450	Up to ~$98,900
15%	~$49,451–$545,500	~$98,901–$613,700
20%	Over ~$545,500	Over ~$613,700

These thresholds are adjusted annually for inflation. Keep in mind state capital gains taxes may apply as well.

2. Match Asset Types to Account Types (Asset Location)

Asset location places investments in accounts based on how they’re taxed:

Tax-inefficient assets (high turnover, dividends) → tax-deferred or tax-free accounts
Tax-efficient assets (broad index funds, ETFs) → taxable accounts
High-growth assets → Roth IRAs (tax-free growth)

This strategy reduces taxable events and works well when combined with tax-loss harvesting and Roth conversion planning.

Capital gains decisions affect more than just your tax bill this year. They often interact with Medicare premiums, Social Security taxation, and withdrawal strategy, which is why they should be considered within a broader tax planning for retirees framework.

3. Harvest Tax Losses When Appropriate

Tax-loss harvesting means selling investments at a loss to offset realized gains, reducing your tax bill.

Key points:

Capital losses offset capital gains dollar-for-dollar
Excess losses can offset up to $3,000 of ordinary income annually
Unused losses carry forward indefinitely

Avoid the wash sale rule by waiting 31 days before rebuying the same security.

For more on how distributions can affect taxable events even without sales, see: Do You Receive Mutual Fund Capital Gains Distributions?

4. Time Sales in Low-Income Years

Realizing gains in years where your income is lower — such as early retirement years before Social Security and RMDs — can reduce how much you pay in capital gains tax. Lower taxable income may also open up the 0% capital gains bracket, which applies at lower income levels.

This kind of income sequencing works hand-in-glove with:

5. Use Qualified Charitable Distributions (QCDs)

If you are over age 70½ and have an IRA, Qualified Charitable Distributions let you transfer up to $105,000 annually directly to charity without including the amount in taxable income — effectively offsetting gains without increasing MAGI.

QCDs count toward RMDs and can help manage:

Taxable income spikes
Medicare IRMAA brackets
Social Security taxation

This strategy is most impactful when planned with your overall tax and income sequencing.

6. Coordinate Roth Conversions and Capital Gains

Roth conversions increase Modified Adjusted Gross Income (MAGI) in the conversion year, which can unintentionally raise your capital gains tax rate, trigger Medicare IRMAA, or push other income items into higher brackets.

To minimize unintended tax consequences:

Stage Roth conversions during low-income years
Avoid year-end lump conversions that push MAGI too high
Coordinate with RMD planning and Social Security timing

Learn more about timing and tradeoffs in Roth Conversions After 60 — When They Make Sense and When They Don’t.

7. Mitigate the Net Investment Income Tax (NIIT)

Investors with MAGI above $250,000 (individual) or $320,000 (married filing jointly) generally pay a 3.8% Net Investment Income Tax (NIIT) on net investment income, including capital gains.

Ways to manage NIIT exposure include:

Holding tax-efficient assets in tax-advantaged accounts
Reducing MAGI through deductions or income sequencing
Strategically timing capital gains realizations

NIIT is one of the less understood drivers of tax drag for high-net-worth retirees; planning ahead can avoid unnecessary surtaxes.

8. Consider Partial Sales and Installment Sales

Instead of selling a large position all at once, consider:

Partial sales over multiple years to spread tax impact
Installment sales for privately held business interests to defer gain recognition

These techniques help manage annual taxable income and can make gains fit within lower tax brackets, especially when tied to retirement income flows.

9. Leverage Estate and Legacy Planning

Holding assets until death often results in a step-up in basis for beneficiaries, eliminating capital gains tax on appreciation during your lifetime. Work with estate planning professionals to consider:

Gifting strategies
Trust structures
Timing of transfers

Legacy planning intertwined with tax planning can preserve more wealth for heirs while reducing lifetime taxes.

For related guidance, see 7 Missed IRA Opportunities and Tax Strategies Under the OBBBA.

How a Fiduciary Advisor Helps With Capital Gains

Managing capital gains is not simply about minimizing a tax bill in isolation. A fiduciary advisor integrates tax planning into retirement income, distribution sequencing, healthcare costs, and legacy goals.

A coordinated plan can help you:

Time asset sales for tax efficiency
Model outcomes across multiple years
Balance tax, cash flow, and longevity risk
Align capital gains decisions with IRA/Roth strategy

You don’t have to navigate these decisions alone. Many retirees find fiduciary guidance valuable — whether for complex planning or even just an annual review. This topic is often part of a broader retirement or tax planning conversation. If you’d like help applying these ideas to your own situation, you can request an introductory conversation here.

Learn more in:

Frequently Asked Questions

What is the difference between long-term and short-term capital gains?
Long-term gains (assets held > 1 year) are taxed at preferential rates (0%, 15%, 20%), while short-term gains are taxed as ordinary income.

How does capital gains recognition affect Medicare premiums?
Capital gains increase MAGI, which can trigger higher Medicare IRMAA premiums. Strategic timing can help manage both taxes and healthcare costs.

What is tax-loss harvesting?
Tax-loss harvesting sells investments at a loss to offset capital gains and up to $3,000 of ordinary income annually, with excess losses carried forward.

This time each year, I review every client’s taxable accounts in search of losses to harvest for tax purposes. While no one likes to have a loss, the reality is that investments fluctuate and have down periods, even if the long-term trend is up. I’ll be contacting each client in the next two weeks and will let you know if I suggest any trades.

Even though we may make some sales, we still want to maintain our overall target asset allocation. Under US tax rules, we cannot buy a “substantially identical security” within 30 days in order to claim a tax loss. This precludes us from taking a loss and immediately buying back the same ETF or mutual fund. It does not however, prevent us from selling one large cap ETF and buying a different ETF that tracks another large cap index or strategy. This means that we can harvest the loss without being out of the market for 30 days and missing any potential gains during that time.

When we harvest losses, we can use those losses to offset any gains we have received and reduce our taxes in the current year. The criticism against tax loss harvesting is that it just serves to postpone taxes rather than actually saving taxes.

For example, let’s say that we purchased 10,000 shares of an ETF for $10 per share and today those shares are only worth $9.00. Our cost basis is $100,000 and if we sold today for $90,000 we could harvest a loss of $10,000. We replace that position with a different ETF and invest our $90,000. Fast forward a couple of years and the position is now worth $120,000. If we sell for $120,000, we would have a $30,000 gain, whereas if we had not done the earlier trades, our gain would be only $20,000. Apply a long-term capital gains rate of 15% and the savings of $1,500 in taxes this year is offset by $1,500 in additional taxes down the road.

So, why bother? There is an additional benefit to tax loss harvesting besides deferring taxes for later: you may be able to use those losses to offset short-term capital gains or ordinary income, which can be at a much higher tax rate than the 15% long-term capital gains rate.

The rules for capital gains are that you first net short-term gains and short-term losses against each other. Separately, you will net long-term gains and long-term losses. If you have net losses in either category, those losses may be subtracted from gains in the other category. So if you had $10,000 in net long-term losses, you could apply those losses against $10,000 of short-term capital gains. For someone in the 35% tax bracket, that $10,000 long-term loss could be worth $3,500, if you can apply that loss towards short-term gains, instead of the $1,500 we would normally associate with a long-term loss.

If you have more capital losses than gains in a year, you can apply $3,000 of those losses against ordinary income, and carry forward the remaining losses into future years indefinitely, until they are used up. If we can use our $3,000 loss against ordinary income, a taxpayer in the 35% bracket will save $1,050 in taxes, which is a lot better than the $450 we would save in long-term capital gains if we did not harvest the $3,000 loss.

After deferring gains for many years, taxpayers may be able to avoid realizing gains altogether two ways. First, if you have charitable goals, you can give appreciated securities to a charity instead of cash. If you give $1,000 worth of funds to a charity, the charity receives the full $1,000; you get a full tax deduction AND you avoid paying capital gains on those shares.

The second way to avoid capital gains is if you allow your heirs to inherit your shares. They will receive a step-up in cost basis and no one will owe capital gains tax. That’s a rather extreme way to avoid paying 15% in capital gains taxes, and most people are going to need their investments for retirement. However, the fact is that delaying taxes can be beneficial and that the tax is not always inevitable.

The reason I share this is that the argument that tax loss harvesting only serves to delay taxes ignores quite a few benefits that you can realize. You may be able to use those capital losses not just to offset capital gains at 15%, but potentially to offset short-term gains at a much higher rate, or to offset $3,000 a year of ordinary income.

Since we primarily use ETFs, we already have a great deal more tax efficiency than mutual funds, and we should have little capital gains distributions for 2015. If you’re not with GLWM and have mutual funds in a taxable account, be aware that many mutual funds have announced capital gains distributions for the end of this year.

There are quite a few ways we aim to add value for our clients and we take special interest in portfolio tax optimization. If there’s a way to help you save money in taxes, that’s going to help you meet your financial goals faster.

9 Ways to Manage Capital Gains in Retirement (Updated for 2026)