A Retired Couple Living on Pension Income Can Sell Stock at 0% Capital Gains Every Year Until 73. Then the First RMD Lands Underneath Those Gains, and Part of Every Sale After That Is Taxed at 15%

A retired couple living on pension income can sell appreciated stock every December and owe no federal tax on the gain. This works year after year until one spouse turns 73. That’s when the first required minimum distribution (RMD), the annual withdrawal the IRS requires from tax-deferred retirement accounts, adds ordinary income and pushes part of those same gains into the 15% bracket. We recently looked at how a Roth conversion fits the zero rate within a single year. This time the trigger is a birthday, so the question is about timing across years.

How Capital Gains Stack on Top of Pension Income

For 2026, married couples filing jointly pay 0% on long-term gains (assets held more than a year) as long as taxable income stays at or below $98,900. The key idea is stacking, and ordinary income, such as pensions and IRA withdrawals, fills the brackets first, and gains sit on top. Only the gains that fit under that line after all ordinary income is considered get the zero rate.

Deductions expand that space; in 2026, the standard deduction for joint filers is $32,200, plus $1,650 for each spouse age 65 or older. There’s also a recent senior deduction of $6,000 per person, available from 2025 through 2028. For joint filers, it starts phasing out once modified adjusted gross income (MAGI) goes above $150,000.

Modeling the Window Before and After the First RMD

The model makes a few assumptions. First, both spouses are 72 in 2026, have $60,000 in combined pension income, and receive no Social Security. Their traditional IRA held $800,000 at the end of the prior year, and their taxable brokerage account has plenty of long-term gains. The 2026 thresholds are used for both years so the comparison remains clean.

Before RMDs begin, their deductions total $47,500. That leaves enough space to sell $86,400 of gains at 0%, and MAGI comes out to $146,400, just under the senior deduction phase-out. RMDs start at age 73 for anyone who turned 72 after December 31, 2022. The IRS divisor at that age is 26.5, so the first RMD comes to about $30,189. That cuts the zero-rate space to about $56,211.

If the couple sells the full $86,400 anyway, roughly $30,189 of it is taxed at 15%, costing about $4,528. MAGI also rises past the senior deduction phase-out line, pushing more of it into the 15% bracket. Put simply, each dollar of RMD pushes out a dollar of gain that would have been tax-free.

Harvesting a gain means selling and buying the same shares right back, which resets the cost basis (the purchase price the tax code uses) to today’s higher value. The wash sale rule in 26 U.S.C. § 1091(a) blocks a loss deduction when the same security is bought within 30 days. It only covers losses, so buying back right after selling at a gain is allowed.

Roth Conversions Compete for the Same Low-Income Years

These same years are also when many retirees do Roth conversions. A conversion is considered ordinary income, so it raises the floor that benefits stack on top of. The more space conversions use, the less is left for gains taxed at zero. One way to weigh it is to look at the bracket future RMDs would land in. If they’d push the couple above the 22% line, which starts at $100,800 of taxable income for joint filers, converting now tends to look better (we walked through how a large pre-tax balance becomes a first-year tax bill once withdrawals begin, and how to shrink it years early, in a free guide here). A small IRA paired with large unrealized gains tips the math toward harvesting.

Income Lines That Count Gains Taxed at Zero

Gains taxed at 0% still count as income everywhere else. The net investment income tax applies to joint filers with MAGI above $250,000. For couples who also collect Social Security, up to 85% of benefits can become taxable once half the benefits plus all other income goes above $44,000.

Medicare premiums also depend on income. The standard Part B premium for 2026 is $202.90, and joint filers with income over $218,000 pay at least $284.10. The surcharge is based on the tax return from two years earlier, so a big harvest year shows up on a later Medicare bill.

Tools That Protect the Zero-Rate Space After RMDs Start

Qualified charitable distributions (QCDs) are gifts sent straight from an IRA to a charity. They’re available from age 70 1/2, with a 2026 limit of up to $111,000 per person. They count toward the RMD but don’t count toward taxable income, so they protect the zero-rate space. Giving appreciated shares directly to charity avoids realizing the gain. Heirs who inherit stock get a basis equal to its fair market value at the date of death, which is why most people hold appreciated positions instead of selling them.

A December Routine for Every Year Before the First RMD

For a couple in this spot, the year-end routine usually goes like this. Estimate the year’s pension income, subtract deductions, and see how much room you have under the 0% line. Then sell and buy back long-term winners up to that amount, while watching the $150,000 senior deduction phase-out and the $218,000 Medicare line. The thresholds change every year, and the senior deduction is scheduled to end after 2028. Once the first RMD arrives, the space shrinks by about the size of that withdrawal.

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