Sell Profitable Holdings at a 0% Federal Rate and Buy Them Back the Same Day, Source Says Wash-Sale Rules Do Not Apply
A tax-gain-harvesting strategy described by the source involves selling profitable holdings at a 0% federal tax rate and immediately buying back the same shares to reset their cost basis permanently. Section 1091 of the U.S. Internal Revenue Code applies the wash-sale rule only to repurchases made shortly before or after a sale at a loss. The source says the rule imposes no repurchase waiting period or penalty on profitable transactions. Even when long-term gains are exempt from federal income tax, they still increase adjusted gross income and may trigger or increase the taxable portion of Social Security benefits, reduce or eliminate Affordable Care Act premium tax credits, trigger Medicare Part B and Part D IRMAA surcharges, reduce or phase out education tax credits, the Saver’s Credit and the student-loan-interest deduction, and create state-tax costs. The source says most states tax capital gains as ordinary income and do not follow the federal 0% exemption. For investors holding individual stocks or ETFs in a regular taxable brokerage account, the source describes selling profitable holdings and immediately repurchasing the same number of shares. It presents the approach as the opposite of the more familiar practice of harvesting tax losses. The source does not provide the name of the strategy because the relevant sentence is incomplete. The source explains that the Internal Revenue Service has three federal long-term capital-gains rates—0%, 15% and 20%. If taxable income falls within the 0% bracket, qualifying long-term gains are not subject to federal income tax. It says Section 1091 applies only to loss transactions: If a taxpayer buys back substantially identical securities within 30 days before or after selling a losing position, the loss cannot be deducted. The source says the statute does not mention profitable transactions, so there is no cooling-off period or repurchase restriction for them. After the transaction, the position’s cost basis becomes the new purchase price. The investor remains invested while reducing the amount of future unrealized appreciation that may be taxable. The source cites two provisions as the legal basis for the approach: Section 1(h) of the Internal Revenue Code, which sets preferential rates for long-term capital gains, including a 0% bracket; and Section 1091, the wash-sale rule, which it says restricts only loss transactions. The source says the IRS does not prevent taxpayers from realizing gains that qualify for the 0% rate and imposes no repurchase ban in that situation. For 2026, eligibility is determined by taxable income rather than pretax gross income. The source says single taxpayers, heads of household and married couples filing jointly may qualify for the 0% federal long-term capital-gains rate if their taxable income, after the standard or itemized deduction, is below the applicable thresholds published by the IRS. It also says that, after applying the 2026 standard deduction, a married household with pretax income in the six-figure range may still fall within the 0% bracket. The source does not provide the applicable 2026 thresholds or standard-deduction amounts. The source identifies as potential users people with limited income who have not started receiving Social Security or required minimum distributions, partly retired couples, people taking extended time off, graduate students with investment accounts, business owners whose revenue is low that year, and employees between jobs. It says a W-2 employee earning $150,000 a year generally cannot use the strategy because the gains would fall into the 15% or 20% tax brackets. The source outlines these steps: estimate full-year 2026 taxable income by including wages, interest, dividends, IRA withdrawals and short-term capital gains, then subtracting the standard or itemized deduction; calculate the gap between current taxable income and the upper limit of the 0% rate, treating that gap as the amount of long-term gains that could be realized without federal tax; identify profitable positions held for more than one year, since short-term gains are taxed as ordinary income; sell only enough shares to fill the 0% threshold, with any excess taxed at 15%; and immediately buy back the same number of shares. The source says the new purchase price becomes the cost basis, allowing the investor to remain invested while permanently reducing future taxable unrealized gains. The source warns that gains exempt from federal tax still count in total-income calculations and increase AGI. It says this can make Social Security benefits taxable or increase their taxable share; reduce or eliminate ACA premium tax credits; trigger Medicare Part B and Part D IRMAA surcharges and raise monthly health-care costs; phase out education tax credits, the Saver’s Credit and the student-loan-interest deduction; and create state-tax liabilities. It also says the tax rate applies marginally rather than being recalculated on the entire amount. If income exceeds the 0% threshold by $5,000, only the excess $5,000 is taxed at 15%, according to the source. A much larger excess, however, can materially increase the overall tax burden, so the source advises using tax software to model the result accurately in advance. The source states that the current 10-year U.S. Treasury yield is 4.65% and that cash-management yields have recovered, prompting many investors to adjust their portfolios. It characterizes cost-basis resetting for investors who qualify for the 0% rate as a low-cost, legal tax-planning method. This item requires tax and factual review before publication because the supplied source contains incomplete sentences, omits the 2026 income thresholds and standard-deduction amounts, and makes legal and tax claims that should be independently verified.
Section 1091 of the U.S. Internal Revenue Code applies the wash-sale rule only to repurchases made shortly before or after a sale at a loss. The source says the rule imposes no repurchase waiting period or penalty on profitable transactions.
Even when long-term gains are exempt from federal income tax, they still increase adjusted gross income and may trigger or increase the taxable portion of Social Security benefits, reduce or eliminate Affordable Care Act premium tax credits, trigger Medicare Part B and Part D IRMAA surcharges, reduce or phase out education tax credits, the Saver’s Credit and the student-loan-interest deduction, and create state-tax costs. The source says most states tax capital gains as ordinary income and do not follow the federal 0% exemption.
For investors holding individual stocks or ETFs in a regular taxable brokerage account, the source describes selling profitable holdings and immediately repurchasing the same number of shares. It presents the approach as the opposite of the more familiar practice of harvesting tax losses. The source does not provide the name of the strategy because the relevant sentence is incomplete.
The source explains that the Internal Revenue Service has three federal long-term capital-gains rates—0%, 15% and 20%. If taxable income falls within the 0% bracket, qualifying long-term gains are not subject to federal income tax.
It says Section 1091 applies only to loss transactions: If a taxpayer buys back substantially identical securities within 30 days before or after selling a losing position, the loss cannot be deducted. The source says the statute does not mention profitable transactions, so there is no cooling-off period or repurchase restriction for them. After the transaction, the position’s cost basis becomes the new purchase price. The investor remains invested while reducing the amount of future unrealized appreciation that may be taxable.
The source cites two provisions as the legal basis for the approach: Section 1(h) of the Internal Revenue Code, which sets preferential rates for long-term capital gains, including a 0% bracket; and Section 1091, the wash-sale rule, which it says restricts only loss transactions. The source says the IRS does not prevent taxpayers from realizing gains that qualify for the 0% rate and imposes no repurchase ban in that situation.
For 2026, eligibility is determined by taxable income rather than pretax gross income. The source says single taxpayers, heads of household and married couples filing jointly may qualify for the 0% federal long-term capital-gains rate if their taxable income, after the standard or itemized deduction, is below the applicable thresholds published by the IRS. It also says that, after applying the 2026 standard deduction, a married household with pretax income in the six-figure range may still fall within the 0% bracket. The source does not provide the applicable 2026 thresholds or standard-deduction amounts.
The source identifies as potential users people with limited income who have not started receiving Social Security or required minimum distributions, partly retired couples, people taking extended time off, graduate students with investment accounts, business owners whose revenue is low that year, and employees between jobs. It says a W-2 employee earning $150,000 a year generally cannot use the strategy because the gains would fall into the 15% or 20% tax brackets.
The source outlines these steps: estimate full-year 2026 taxable income by including wages, interest, dividends, IRA withdrawals and short-term capital gains, then subtracting the standard or itemized deduction; calculate the gap between current taxable income and the upper limit of the 0% rate, treating that gap as the amount of long-term gains that could be realized without federal tax; identify profitable positions held for more than one year, since short-term gains are taxed as ordinary income; sell only enough shares to fill the 0% threshold, with any excess taxed at 15%; and immediately buy back the same number of shares. The source says the new purchase price becomes the cost basis, allowing the investor to remain invested while permanently reducing future taxable unrealized gains.
The source warns that gains exempt from federal tax still count in total-income calculations and increase AGI. It says this can make Social Security benefits taxable or increase their taxable share; reduce or eliminate ACA premium tax credits; trigger Medicare Part B and Part D IRMAA surcharges and raise monthly health-care costs; phase out education tax credits, the Saver’s Credit and the student-loan-interest deduction; and create state-tax liabilities.
It also says the tax rate applies marginally rather than being recalculated on the entire amount. If income exceeds the 0% threshold by $5,000, only the excess $5,000 is taxed at 15%, according to the source. A much larger excess, however, can materially increase the overall tax burden, so the source advises using tax software to model the result accurately in advance.
The source states that the current 10-year U.S. Treasury yield is 4.65% and that cash-management yields have recovered, prompting many investors to adjust their portfolios. It characterizes cost-basis resetting for investors who qualify for the 0% rate as a low-cost, legal tax-planning method.
This item requires tax and factual review before publication because the supplied source contains incomplete sentences, omits the 2026 income thresholds and standard-deduction amounts, and makes legal and tax claims that should be independently verified.