How To Pay 0% Tax On Your Investments (NEW 2026 Rules!)

Hinzugefügt: 2026-05-06

[00:00:00]Millions of investors are sitting on gains that they are afraid to sell because they think they will get crushed in taxes. But as a licensed CPA, I find that most investors are completely unaware of the 0% tax bracket and other legitimate ways to pay no tax on their investment gains. I mean, imagine selling your investments for a profit and owing the IRS absolutely nothing on the cash you receive back, all without using some type of IRA or 401k to accomplish this. It is 100% possible.

[00:00:37]And if you watch this until the very end, you will know exactly how this works and how to accomplish this. So, let's jump right into it.

[00:00:47]Okay, so let's start with the 0% tax bracket that most people do not even know about. So most people think that their investment gains are taxed as ordinary income, which we know are taxed from 10 to 37% depending on our income level. But what most people do not know is the fact that the IRS actually offers lower tax rates for long-term investors, which are referred to as long-term capital gains rates. And when you qualify for these lower rates, your investment gains can be taxed as low as 0% and as high as 20%. So here's how it works. When you sell an investment for a profit, the government will tax that gain based on two simple factors. Number one, how long you held it, and number two, how much total income you report that year. If you sell the investment within 12 months of buying it, then your gains would be taxed at the higher ordinary income tax rates, ranging up to 37%, which would do you no good for tax purposes. But if you held the investment for longer than 12 months, then your gains would be taxed at the lower capital gains tax rates, which would be nearly half of the ordinary income tax rates that we just saw. So whether you're buying stocks, crypto, real estate, or other assets, by simply holding on to those assets for at least 12 months, you are cutting your taxes down tremendously by default. But some people are actually savvy enough to not only qualify for these lower rates, but to also qualify for the lowest rate that is being offered here, which is 0%. And believe it or not, there are people with very high amounts of income and assets that are able to qualify for the 0% tax rate. So, let's talk about how this works. Now, on the surface, long-term capital gains tax rates do vary based on the amount of income you report in a specific tax year. For example, in 2026, single earners with less than about $49,000 in income qualify for the 0% tax rate, and married taxpayers can report up to $99,000 in total income and still qualify for that same rate on their investment gains. But here's where this gets very interesting. This is all based on your taxable income, which is your income after applying all deductions.

[00:03:29]There are people who earn far beyond these income levels who still end up qualifying for the 0% rate because they take so many deductions on their tax returns or they use various timing strategies to sell their investments when they are actually in that 0% bracket. And I'll explain this. So, let's start by going over some deduction strategies first and illustrate this concept with the simplest deduction in the entire tax code, the standard deduction, which almost everyone uses or can use if they choose to. So, in 2026, the standard deduction is about $16,000 for single taxpayers. So, a single person with $63,000 in total income might still qualify for the 0% capital gains rate because after taking the standard deduction, their taxable income is just $47,000, which is below the threshold. And for married taxpayers, the standard deduction is twice as much or about $32,000.

[00:04:36]So, a married taxpayer with $130,000 in total income may still qualify for the 0% tax rate because their taxable income after applying this deduction is just $98,000.

[00:04:51]And this is just one deduction out of hundreds that exist. For ordinary individuals, there are deductions for student loan interest, retirement savings, charitable donations, mortgage interest, state and local taxes you may pay, or simply being classified as a senior citizen, plus so much more that can easily subtract tens of thousands of dollars from your taxable income. To illustrate the power of deductions, let's go over a high income example. So, let's say we have a married couple with $500,000 in income. Well, if this was their taxable income, then we know they would have at least a 15% long-term capital gains tax on their investment gains. But let's say this was actually their gross income and that they also have $200,000 in business deductions, maybe from taking advantage of things like the QBI deduction or hiring family members or simply reinvesting dollars back into their business. And on top of that, let's say they also own a rental property or bought one, which granted them another $200,000 in deductions through things like depreciation, cost segregation, and other things that we cover on this channel all the time. Well, in this exact example, even though they earned $500,000 in income, they would only have about $100,000 remaining after taking these deductions and only $68,000 after taking the standard deduction, allowing them to qualify for the 0% tax rate on their investment gains. Now, while the deductions that everyone may be able to take can vary, the point here is very simple. There are hundreds of ways to reduce your taxable income to pay lower rates of taxes. Just comment deductions below if you want to learn more about that. But for now, let's move on to another major way to qualify for the 0% capital gains rate. And if I were to summarize it in one word, it would be timing. As investors, we can usually choose when we actually sell our assets or our investments, which means we can choose the exact time that we may want to trigger a taxable event. For example, let's say we have $50,000 in unrealized investment gains that we have not sold, which means that those gains are not taxable by the government because gains are only taxable when we sell it, not when they rise in value. And let's also say that we are married with a household income of about $200,000 with our spouse, but expect it to be less than $100,000 next year. So, here's the question. Would you rather A sell that investment gain today and pay a 15% tax due to your current income level or B wait until next year to sell the investment when you may have a 0% capital gains rate? Let me know your answer in the comments below. But the idea here is simple. If we can trigger our gains at a time where we are in the 0% bracket or maybe just a lower tax bracket overall, we can significantly reduce our taxes. Over the course of someone's lifespan, income is rarely constant. People retire, some people take breaks from work, some people get laid off or have income spikes that are followed by major income drops in subsequent years for a variety of different reasons. For example, I have clients who are attorneys and one big case could be the difference between them earning $3 million in a single year or $100,000.

[00:08:47]I've worked with insurance agents, consultants, or sales reps where one big client or one big transaction could cause a huge spike in their income followed by a lower income amount in the following year. And I've even seen scenarios where families will simply decide to rely on one spouse's income instead of two, resulting in a big drop in their taxable income. But regardless of the scenario, the strategy here is simple. Trigger long-term capital gains during your lower income years, which is when your investment gains will be taxed at the lowest rates possible. Plus, realistically, in the real world, if we have lower income, [music] there's a chance that we actually need to sell some assets anyway to supplement that drop in income. But what we don't want, and what I see all the time, is people triggering all these investment gains during years where they don't need that money and they're already in a much higher tax bracket, only making it more expensive. So to realistically and legally accomplish a 0% tax rate, you need to first know the brackets that actually qualify for those rates. And if you don't qualify for it naturally, you can either A take enough deductions to get your taxable incomes into those brackets regardless of the amount or b carefully timing your investment gains so that you can squeeze income into them strategically. Now, beyond this, there are more nuance strategies that you could use to avoid paying capital gains tax like using trusts like CRTs or using borrowing strategies like the buy, borrow, die strategy, for example. Make sure you subscribe if you want to learn more about any of this. And if you need immediate assistance, just apply to work with my team today at mycpa coach.com.