Is Filling up the 0% Capital Gains Bucket a Smart Move for Low-Income Years?

By Sean Hummel, CFP®

November 18, 2025

“The wealthiest families don’t react; they strategically position themselves for multiple possible futures.”

As a Financial Planner with years of experience guiding clients through the twists of tax planning, I’ve often emphasized one underappreciated gem in the U.S. tax code: the 0% long-term capital gains rate. For those navigating low-income periods (think early retirement, sabbaticals, or career transitions) this “bucket” can be a powerful tool to harvest gains tax-free, resetting cost bases and boosting long-term wealth without a federal tax bite. With the recent passage of the One Big Beautiful Bill Act (OBBBA) in July 2025, which locks in many Tax Cuts and Jobs Act (TCJA) provisions permanently, this strategy remains as viable as ever for 2025 and beyond. But timing is key, low-income windows don’t last forever, so let’s dive into how to approach filling that 0% bucket under current law.

Note: This post is for educational purposes only, based on tax rules as of November 13, 2025. It doesn’t constitute personalized advice. Tax situations vary widely, always consult your CPA or financial advisor to model your specifics.

The Basics: What Is the 0% Capital Gains Bucket?

Long-term capital gains (LTCG) arise when you sell appreciated assets like stocks, bonds, or real estate held for more than one year. Unlike short-term gains, which are taxed at ordinary income rates (up to 37% in 2025), LTCG enjoy preferential rates: 0%, 15%, or 20%, depending on your taxable income.

The 0% rate applies if your total taxable income falls below certain thresholds. Taxable income is your adjusted gross income (AGI) minus deductions (standard or itemized). For 2025, those limits are:

These thresholds are inflation-adjusted annually (up about 2.8% from 2024) and the OBBBA ensures the underlying TCJA structure persists without reversion to pre-2018 hikes. Exceed them, and gains spill into the 15% bracket (up to $600,050 for joint filers), but the 0% space is yours to fill strategically.

Why “fill the bucket”? By realizing just enough gains to hit the threshold without crossing it, you pay zero federal tax on those profits. State taxes may apply (check your locale), and watch the 3.8% Net Investment Income Tax if modified AGI tops $200,000 single/$250,000 joint.

Why Low-Income Years Are Prime Time for This Strategy

Life’s low-income phases (perhaps you’re between jobs, drawing down retirement savings judiciously, or caring for family) often drop your taxable income into the 0% LTCG zone. Under current law, the standard deduction for 2025 is $15,750 single/$31,500 joint, plus an extra $6,000/$12,000 if 65+ thanks to OBBBA enhancements. This amplifies the bucket’s size.

For example, a married couple with $80,000 AGI might have $36,500 taxable income after the standard deduction, leaving ~$60,200 of room for tax-free gains. You can sell $60,000 in appreciated stock and have ZERO federal LTCG tax. The OBBBA’s permanence means no sunset cliff like the original TCJA; brackets stay wide and rates low for the foreseeable future.

These years are fleeting. Once Social Security, pensions, or required minimum distributions ramp up income, that 0% space shrinks. Acting now can lock in savings: A $50,000 gain at 0% today avoids 15% tax later. This could add up to $7,500, or more if the gains continue to grow further.

How to Fill the Bucket: Step-by-Step Considerations

Filling the 0% bucket isn’t set-it-and-forget-it, it’s a deliberate harvest. Here’s a general roadmap aligned with 2025 rules:

1. Project Your Taxable Income: Tally AGI from wages, interest, dividends, etc., then subtract deductions. Use IRS Form 1040 worksheets or planning software to forecast. Factor in OBBBA’s tweaks, like the expanded Qualified Business Income deduction (now permanent at 20%).
2. Identify Assets to Sell: Target holdings with gains held longer than one year. Prioritize those with modest appreciation or where you’d rebalance anyway. Avoid “collectibles” (art, coins)—they cap at 28% even in the bucket.
3. Harvest Precisely: Sell up to the threshold. If you’re $10,000 shy, realize $10,000 in gains. Reinvest proceeds to maintain portfolio allocation. Tools like tax-loss harvesting (selling losers to offset gains) can create more room.
4. Account for Broader Effects: Gains boost AGI, potentially phasing out credits (e.g., child tax credit, Student loan interest deduction,Traditional IRA contribution deduction, American oportunity credit, lifetime learning credit, Earned income tax credit) or triggering Net Investment Income Tax.
5. Multi-Year Approach: Spread sales over low-income years to avoid bunching. For 2026, thresholds rise slightly so always check the most current tax bracket thresholds. Remember, this resets your cost basis upward, reducing future taxes on the same assets.

OBBBA’s Role: Stability and New Twists

Signed July 4, 2025, the OBBBA averts TCJA’s 2025 sunset, keeping LTCG rates at 0%/15%/20% and brackets inflation-adjusted. It boosts the standard deduction modestly for 2025, enlarging the 0% bucket, and makes pass-through deductions permanent (ideal if your income includes business gains.)

On capital gains specifics, OBBBA enhances Qualified Small Business Stock exclusions (up to $15M lifetime) and extends Opportunity Zones for deferral, but the core 0% mechanics stay intact.

Potential Pitfalls and Pro Tips

Watch phase-ins: Gains count toward taxable income, so overfill and pay 15% on excess. Market volatility? Harvest in dips for lower per-share taxes. Estates benefit too, step-up at death erases gains for the inheritor(s), but proactive harvesting preserves liquidity.

For low-income filers, this strategy shines brightest when paired with Roth conversions or charitable bunching, but integration requires precision and care.

Final Thoughts: Harvest Now, Thrive Later

Low-income years are like rare tax holidays, don’t let the 0% bucket go unfilled. Under 2025’s stable tax structure, courtesy of OBBBA and IRS adjustments, you could shield tens of thousands in gains federally tax-free, supercharging your compounding growth.

Curious if this fits your 2025 picture? Review projections with pros before year-end.