When 0% capital-gains harvesting beats a Roth conversion

The speaker argues that low-income years between retirement and Social Security are not automatically Roth-conversion years. A conversion pays ordinary income tax now to reduce future required minimum distributions (RMDs); it helps when those distributions would face higher rates. If the larger tax opportunity is appreciated investments in a brokerage account, realizing long-term gains at the 0% federal rate may be better because it requires no tax payment today.

Long-term capital gains have 0%, 15% and 20% federal brackets. In 2026, the 0% ceiling is just under $99,000 of taxable income for married joint filers and around $49,000 for single filers. A married couple over 65 may have roughly $47,000 in deductions: a standard deduction a little over $32,000, an existing age-based deduction, and a new $6,000 per person deduction ($12,000 total). That can leave room for 0% gains at around $146,000 of total income, though the new deduction phases out above $150,000. Ordinary income fills the brackets first; gains count toward the ceiling, and any excess enters the 15% bracket.

Consider a couple with $600,000 in a traditional IRA whose projected RMDs stay in the 12 or 22% bracket, but $700,000 in brokerage assets with $400,000 of unrealized gains. If they have room for $60,000 of long-term gains, they can sell, realize that gain at 0% federal tax, and immediately repurchase the same position. The wash-sale restriction applies to losses, not gains; their cost basis rises by $60,000. Repeated over a five or six year window, harvesting could reset several hundred thousand dollars of gains.

Conversions still win when projected RMDs push income into the 24 or 32 percent bracket. Roth assets also reduce the tax pressure when a surviving spouse files single and pass to children income-tax-free, although heirs must empty the account within 10 years. Brokerage shares held until death may instead receive a step-up in basis. Because conversions use income space that could otherwise hold 0% gains, some plans harvest early and convert later—but reassess each year.

Pull three numbers: projected RMDs, embedded brokerage gains, and the income floor from sources such as pensions, Social Security, interest, dividends and rent. In October or November, recalculate available space, check each lot’s one-year holding period, sell and repurchase positions as appropriate, and document the new basis. Account for unexpected fund distributions, state tax (Texas versus California or Minnesota), marketplace-health-plan premiums before 65, and Medicare premiums’ two-year income lookback. Do not let a tax move dictate an unsuitable investment sale.