How to Capture the 0% Capital Gains Bracket in 2025 (with OBBBA upgrades) | Allworth Financial

If you can pay zero, you should pay zero. The 0% long‑term capital gains (LTCG) bracket lets you recognize gains on assets held more than a year without owing federal tax if your taxable income stays under specific thresholds. Gains and qualified dividends share these preferential brackets. Below is a practical playbook, updated for the One Big Beautiful Bill Act (OBBBA).

Know your thresholds (and where they live)

For 2025 returns, the top of the 0% LTCG band is approximately:
• $48,350 for Single filers
• $96,700 for Married Filing Jointly
• $64,750 for Head of Household

Stay at or under your band and the portion of your long‑term gains and qualified dividends that fits inside it is taxed at 0%. Cross the line and the excess moves to 15% (and eventually 20%).

The stacking rule (why “room” in your bracket matters)

Think of your income as a layer cake. Ordinary income (wages, interest, pension, Social Security that’s taxable, Roth conversions) forms the base layer. Your long‑term capital gains and qualified dividends are stacked on top. The part of that top layer that still sits inside the 0% band is taxed at 0%. Anything spilling over gets the 15% treatment (and for very high incomes, 20%). Planning is about measuring how much “room” is left in that 0% layer before you overflow.

What OBBBA changed that helps the 0% strategy

OBBBA didn’t rewrite the capital‑gains rate table. The 0%, 15%, and 20% structure remains. What it did do is add new deductions that can widen your window by lowering taxable income. Highlights include:

• A new deduction for seniors (65+): $6,000 per qualifying individual for 2025–2028 (potentially $12,000 for a qualifying couple filing jointly), with phase‑outs at higher incomes.
• Targeted deductions tied to certain categories of earned income (e.g., tips or overtime) in 2025–2028, subject to caps and phase‑outs.

Mechanically, additional deductions reduce the income that pushes you toward the edge of the 0% band, letting you realize more LTCG at 0%.

Quick math: what “filling the bracket” looks like

Example: You’re retired and married filing jointly. You haven’t yet taken Social Security, and you can structure your income from IRAs, Roth IRAs, and taxable accounts so that your projected taxable income (before capital gains and qualified dividends) is $75,000. The top of your 0% band is $96,700, giving you $21,700 of room. That means you could harvest up to $21,700 of long‑term gains at 0%. If you also expect $10,000 of qualified dividends, those consume part of the same band, leaving $11,700 of headroom for zero‑tax gain harvesting. Short‑term gains don’t qualify; they’re taxed at ordinary rates.

Six smart ways to exploit the 0% bracket

1. Harvest gains in low‑income years.

   If you’re retiring before RMDs, taking a sabbatical, or simply having a lighter‑income year, use that “valley” to realize long‑term gains up to your 0% ceiling. You effectively step up your basis without a federal tax bill today (state taxes may still apply).

2. Coordinate with Roth conversions.

   Roth conversions consume ordinary‑income space and can crowd out your 0% LTCG room. In some years, zero‑tax gain harvesting will be the better use of the band; in others, filling lower ordinary brackets with conversions wins. Model both paths annually. Once you use the space, it’s gone for the year.

3. Pair gains with new deductions OBBBA added.

   If you’re 65+, that $6,000 per‑person deduction (when eligible) can expand your 0% capacity. Likewise, any eligible deductions tied to specific kinds of earned income can pull taxable income down, creating more room for 0% gains.

4. Mind your distributions.

   Year‑end capital‑gains distributions from mutual funds and some ETFs can unexpectedly “fill” your 0% band and tip excess gains into 15%. If you’re on the edge, favor tax‑efficient funds or manage timing.

5. Use losses deliberately.

   Loss harvesting offsets gains, but when your gains are already landing at 0%, creating losses can lower basis unnecessarily, potentially increasing future taxes. In true 0% years, gain harvesting often beats loss harvesting (but exceptions apply, particularly where AGI‑based thresholds or phase‑outs are in play).

6. Stagger large sales.

   If you’re selling a concentrated position or private shares, consider an installment sale (for eligible private transactions) or multi‑year liquidation to repeatedly refill the 0% band rather than pushing everything into one higher‑tax year.

Founders & early investors: OBBBA sweetened QSBS (Section 1202)

For new Qualified Small Business Stock (QSBS) issued on or after mid‑2025, OBBBA expanded benefits: the eligible issuer asset test increased (from $50M to $75M, indexed), the excludible gain cap rose (from $10M to $15M, indexed), and a graduated exclusion allows 50% after 3 years, 75% after 4 years, and 100% after 5 years for qualifying stock.

Translation: with QSBS, you may bypass the 0% bracket entirely because the gain itself can be excluded. If you won’t reach five years, the partial 3‑ and 4‑year exclusions create interim planning opportunities.

Real estate & private deals: Opportunity Zones made permanent

OBBBA made Qualified Opportunity Zones (QOZ) a permanent tool and revived basis step‑ups (for example, 10% at 5 years), while enhancing incentives for certain rural zones (for example, a 30% basis step‑up at 5 years) and adding periodic re‑designation cycles.

The core benefit remains: hold a qualifying QOZ investment 10+ years and post‑investment appreciation can be federally tax‑free. That’s powerful if you’ve already maxed your 0% bracket or need to defer a large gain you can’t fit at 0% this year.

Mind the other thresholds

The 3.8% Net Investment Income Tax (NIIT), Medicare IRMAA surcharges, and various AGI‑based phase‑outs use different income measures. Keeping gains at 0% doesn’t automatically avoid those thresholds. This is where holistic projections help you avoid “winning” on LTCG while triggering costs elsewhere.

Bottom line

The 0% capital gains bracket is a planning lever. Used well, it lets you reposition wealth, reset cost basis, and free up flexibility for the future, all while the IRS takes a pass on the bill. With OBBBA widening the window through new deductions and reinforcing longer-term opportunities like QSBS and Opportunity Zones, the rules of the game are unusually favorable. The key is timing and coordination: knowing when to harvest gains, when to convert to Roth, and when to sit tight. That’s where strategy pays off.

This isn’t about squeezing pennies; it’s about building tax-efficient wealth that lasts decades. The opportunities are here, but they won’t capture themselves. Sit down with your Allworth advisor, map out your income landscape, and make sure you’re using the planning levers to their full advantage.

This material is for educational purposes only and is not tax, legal, or investment advice. Tax laws can change, and individual circumstances vary. Consult your tax professional before acting.

This information is meant for educational purposes and not as direct tax or legal advice. Rules and regulations can shift anytime, so it’s always best to consult a qualified tax advisor, CPA, or attorney for guidance tailored to your specific situation.