The 0% Capital Gains Bracket Reaches $146,400 for a 65-Year-Old Couple in 2026

Originally published on the Golden Acre Notebook on September 29, 2026. Figures are for tax year 2026.

A married couple, both over 65, can have $146,400 of gross income this year and still pay nothing in federal tax on their long-term capital gains. The room is annual, it does not carry forward, and it closes on December 31.

The capital gains table shows $98,900 for a couple, which reads like an income ceiling and is not one. The $98,900 is taxable income, which is what is left after deductions come out. The deduction stack for a couple over 65 in 2026 is the largest it has ever been, and it lifts the real ceiling by nearly $50,000.

What the 0% bracket actually measures

Long-term capital gains and qualified dividends are taxed on their own schedule. For 2026, a married couple pays 0% on that income while total taxable income stays at or below $98,900. A single filer has $49,450 of the same room.

Taxable income is gross income minus deductions. What decides your room is how much your deductions absorb before the gains are counted.

There is also an ordering rule that works in your favor. Ordinary income fills the brackets first, and capital gains stack on top of it. If your deductions are larger than your ordinary income, the unused portion spills over and shelters your gains as well.

The deduction stack for 2026

A married couple where both spouses are 65 or older has three pieces:

• Standard deduction: $32,200

• Additional deduction for age 65: $1,650 per spouse, so $3,300

• Senior deduction: $6,000 per person, so $12,000

That totals $47,500. Add the $98,900 of taxable income the 0% bracket allows and you get $146,400 of gross income.

A single filer over 65 stacks $16,100, $2,050 and $6,000, which is $24,150, and lands at $73,600.

The senior deduction is new and temporary. It arrived for 2025 and expires after 2028, and it phases out at 6% of income above $150,000 for a couple. At $146,400 you are underneath that threshold, so the figure holds together without any clawback. It is scheduled to run through 2028, so this year and two more.

What that looks like on a real return

Take a couple in Scottsdale, both 67. They retired at 65 and they are delaying Social Security until 70, so nothing is coming in from that yet. Their 2026 income is a $38,000 withdrawal from a traditional IRA, $2,000 of interest, and $4,000 of qualified dividends from a brokerage account they have held since the 1990s.

Their ordinary income is $40,000. Their deductions are $47,500. Ordinary income is wiped out entirely and $7,500 of deduction is left over.

That $7,500 spills onto the preferential side. So they can hold $106,400 of long-term gains and qualified dividends before taxable income reaches $98,900. Subtract the $4,000 of dividends already there, and they have room to realize $102,400 of long-term capital gains at a 0% federal rate.

Gross income lands at $146,400. Taxable income lands at $98,900, which is the top of the 0% bracket. Federal tax on the entire realization is zero.

Arizona is a separate matter. The state taxes capital gains as ordinary income at its 2.5% flat rate and gives them no preferential treatment, so the same $102,400 costs about $2,560 in state tax. That is 2.5 cents on the dollar against a federal rate of zero.

You are allowed to buy it right back

The wash sale rule stops you from claiming a loss when you repurchase the same security within 30 days. It applies only to losses. There is no equivalent rule for gains. You can sell a position at 10:00 in the morning, buy it back at 10:01, and your basis resets to the higher price.

Nothing about your portfolio has to change. You still own the same fund, the same number of shares, the same allocation. What changed is that $102,400 of embedded gain has been permanently removed from the position at a cost of zero federal tax, and everything above that new basis is what a future sale will be measured against.

One caution on the repurchase. The new shares start a fresh holding period, so if you sell them again inside twelve months the gain is short-term and taxed as ordinary income. That matters only if you were planning to sell again soon, and it is a reason to harvest from a position you intend to keep.

What it costs to skip a year

The room does not roll forward. December 31 closes it and January 1 opens a fresh one.

If the couple above realizes nothing this year and sells that same $102,400 of gain later, in a year when required distributions have started and their income is higher, the rate is 15%. That is $15,360 of federal tax on a gain that would have cost nothing in 2026.

Required distributions begin at 73. For a couple who retired at 65, that is roughly eight years in which their income is under their control and the 0% room is at its widest. After that, the IRA distributes on the IRS schedule whether they want the income or not, and the room narrows every year.

There is one case where skipping is the right answer. If you intend to hold the position until you die, your heirs receive a stepped-up basis and the gain is erased at no tax cost at all. Arizona is a community property state, so at the first spouse's death both halves of community property generally step up rather than one. Harvesting gains on an asset you will never sell converts a free outcome into a $2,560 Arizona tax bill. Which positions you intend to leave rather than spend is a question to settle alongside your estate attorney, and the answer decides which ones are worth harvesting.

Where this goes wrong

Social Security. The couple above has none yet, which is what makes their example clean. If you are drawing benefits, a capital gain raises the provisional income figure that decides how much of your Social Security is taxable, and a realization can pull another dollar of benefits into taxable income alongside it. The gain itself is still taxed at 0%, but your ordinary income grows, and that shrinks the room. Run the calculation with the benefit included rather than assuming the two are separate.

Year-end fund distributions. Mutual funds distribute realized capital gains to shareholders in November and December, and those distributions count against the same room. Harvesting your full headroom in October and then receiving an unexpected $9,000 distribution in December pushes you over the line. Leave a margin, or wait until the distribution estimates are published.

Medicare. Your 2026 income sets your 2028 Medicare premium surcharge. The first surcharge tier for a couple in 2026 is $218,000, so a household stopping at $146,400 is well underneath it. The 0% room runs out long before the Medicare threshold does, and someone realizing a much larger gain should check both lines.

Marketplace health insurance. If either of you is under 65 and buying coverage through the marketplace, stop here and read what the subsidy cliff does to a realization first. A capital gain counts toward that income test, and crossing the line there costs far more than the 15% you were trying to avoid.

The dollar after $146,400. Gains above that point are taxed at 15%. Above $150,000 of income the senior deduction also begins to disappear at 12% for a couple, so each additional dollar erases 12 cents of deduction that then gets taxed too. The effective rate on gains in that stretch runs closer to 17% than 15%.

What to do with this

Work out your own headroom rather than using the couple above. That means an estimate of the year's ordinary income, your filing status and ages, and the gains and dividends you have already realized.

Do it in November. By then you can see the year's dividends and interest instead of guessing, fund distribution estimates are published, and there is still time to place the trades before the settlement calendar closes the year.

Then realize gains into the room and buy the position back. Repeat it every year that your income allows, because the room is annual and the next year's version arrives empty.

The arithmetic is not difficult, but four different rules read from four slightly different definitions of income, and it is common to optimize one and trip another. I am an Enrolled Agent, admitted to practice before the Internal Revenue Service, and I prepare returns alongside the planning work, so the harvest and the return that reports it get handled by the same person.

If you want your 2026 headroom calculated against your actual holdings before the year closes, that is a conversation worth having.

Aaron Randak, CFP®, EA · Golden Acre Wealth Management · Scottsdale, Arizona

Golden Acre LLC dba Golden Acre Wealth Management is an investment adviser registered with the Arizona Corporation Commission, CRD #337930. This article is educational and is not individualized tax, investment, or legal advice. Tax rules change and their application depends on your specific circumstances, including your filing status, ages, state of residence and the composition of your income. Confirm your own figures against your return before acting on any of it.