There is a version of tax planning where you could make over $100,000 of income, and pay $0 in taxes.
It involves a methodical planning between your pre-tax 401k/Roth and brokerage account. Let me walk through how the details work, and how you can fit it all together:
When you sell different stocks or ETFs in your brokerage account, you generate either a gain or a loss. For example, if you buy Apple stock for $50 and sell it for $200, you generate a gain of $150.
If you hold and sell your stock/ETF for more than one year, the investment classifies as a long-term holding. Long-term holding treatment is preferred over short-term because you get preferential tax rates on the gains.
Why holding more than a year is important?
If you hold for more than a year, you get preferential treatment. Here are the 2026 long-term capital gains rates for a married couple filing jointly in 2026:
| Taxable income (MFJ) | Long-term capital gains rate |
|---|---|
| $0 – $98,900 | 0% |
| $98,901 – $613,700 | 15% |
| Over $613,700 | 20% |
For example, if you earn $120,000 in W-2 wages and file as married, your taxable income after the $32,200 standard deduction is $87,800.
Now, since your taxable income is $87,800, you can sell up to $11,100 of long-term gains and still pay the same $10,040 in taxes. That’s because the 0% bracket goes up to $98,900 of income for married couples in 2026.
In this example, $11,100 of long-term capital gains didn’t increase the amount of taxes paid at the federal level. Depending on your state, though, you might owe some state taxes.
Putting it together
This is where the strategy gets powerful in retirement. Say a married couple, both 65, are living off a mix of 401(k) withdrawals, a taxable brokerage account, and a Roth.
In 2026, they can have 3 deductions:
- Standard deduction (MFJ): $32,200
- Extra standard deduction for being 65+ (both spouses): $1,650 * 2 = $3,300
- New “senior deduction” from the OBBBA, available only for 2025-2028 for taxpayers 65+: $6,000 * 2 = $12,000 (note that this deduction has an income cap and starts phasing out once the adjusted gross income exceeds $150k for married)
Total deduction is $47,500.
In our example, this married couple pulls out $47,500 from their traditional (pre-tax) 401k. That’s ordinary income, but their $47,500 in deductions wipes it out completely. Taxable ordinary income: $0.
Then, they can stack capital gains on top of this. Say they sold $50,000 of stock (that they bought for $10,000 some time back), that would give them $40,000 of long term capital gains. In reality, you also will likely have some income from dividends, but most of that should be qualified too (same tax treatment as long term capital gains). They also decided to take $2,500 from Roth.
This gave them $100,000 of cash needed for their expenses, and paid $0 of federal taxes (state tax may apply).
However, this calculation doesn’t take into consideration Social Security, as they decided to postpone it till 70. The math changes slighly if you do take SS (it counts toward MAGI for senior deduction phase-out, and up to 85% can be taxable depending on your other income)
Overall, planning is important. People who plan ahead usually minimize their taxes & make their portfolio last longer (by needing less cash to pay for taxes)