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Experts say year-end financial planning can be difficult, and unexpected portfolio income can derail tax strategies.
As the calendar draws to a close, some investors are turning to “tax profit harvesting,” or strategically selling profitable brokerage account assets during low-income periods. Depending on your earnings, you may be eligible for 0% capital gains and will not incur any taxes when you sell your investments.
But Kody Garrett, a certified financial planner and founder of Measure Twice Planners in Houston, says your 2025 tax projections have to be accurate or they could end up costing you more than you expected.
With the stock market hovering near all-time highs, many investors are hoping for big gains in their portfolios. Despite the recent volatility; S&P500 As of noon on December 15th, it has risen about 16% since the beginning of the year.
There are several potential benefits to tax gain harvesting. You can earn profits and rebalance your brokerage account without increasing your income. To save on future taxes, you can also sell and buy back assets to “reset basis,” or reset the original purchase price.
If you plan on using this strategy before the end of the year, there are some important things to know.
Taxable income limit for capital gains 0%
If you own the asset for more than a year, the gain is subject to long-term capital gains and is taxed at 0%, 15%, or 20%. Some high earners are also subject to a 3.8% net investment income tax.
The 2025 taxable income limit for 0% capital gains is $48,350 for single filers and $96,700 for married couples filing jointly. In 2026, these thresholds will be even higher.
Calculate your taxable income by subtracting the greater of your standard deduction or itemized deductions from your adjusted gross income. Add any profitable investments you sell to your total.
Year-end income from ETFs and mutual funds
“I think a lot of people forget about qualified dividends,” Garrett said. Eligible dividends are typically sorted by custodians such as Vanguard, Fidelity, and Schwab near the end of the year.
“Qualified dividends” paid by domestic and certain foreign corporations after a specified holding period are eligible for long-term capital gains tax treatment. In contrast, “non-qualified” or “regular” dividends are subject to ordinary income tax rates. Both count as taxable income.
Year-end ETF or mutual fund profit plan
Mutual funds typically provide an estimate of your year-end payout, but you may not know the exact amount until you receive it. Similarly, you may not know whether a dividend is eligible or non-eligible until the end of the year.
However, if your investments are similar to last year, you can estimate by reviewing last year’s tax return, says CFP Michael DeMassa, founder of Forza Wealth Management in Sarasota, Florida.
“The good thing about a 0% capital gains rate is that it’s not a cliff,” he said. If you exceed the taxable income limit, you will pay 15% or 20% of the amount above the 0% threshold.
