What you can actually do to reduce capital gains tax after 65

You cannot avoid capital gains tax entirely once you turn 65 — age alone does not change the tax rate or create an exemption. But several strategies let you reduce what you owe: holding assets longer to may have access to for long-term rates, timing when you sell to stay in a lower tax bracket, donating appreciated assets to charity instead of selling them, and using the step-up in basis when assets pass to heirs. The strategy that works depends on your income, what you own, and whether you plan to sell now or leave the assets behind.

The IRS does not treat people over 65 differently for capital gains purposes. A long-term capital gain (an asset held over one year) is taxed at 0%, 15%, or 20% depending on your total income that year, regardless of your age. What changes at 65 is your access to other tax moves — required minimum distributions from retirement accounts, Medicare premium calculations tied to income, and the ability to claim certain deductions — that can affect how much of your gain actually gets taxed.

Key Takeaways

  • Holding an asset for more than one year before selling qualifies it for long-term capital gains rates (0%, 15%, or 20%), which are lower than short-term rates that match your ordinary income tax bracket.
  • Selling assets in a year when your other income is lower — such as after retirement or before required minimum distributions begin — can keep you in the 0% long-term capital gains bracket.
  • Donating appreciated assets directly to a charity avoids the capital gains tax on the gain and gives you a charitable deduction for the full fair market value.
  • Assets inherited after your death receive a step-up in basis, meaning heirs pay capital gains tax only on gains that occur after they inherit, not on gains during your lifetime.
  • Married couples filing jointly have higher income thresholds for each capital gains tax bracket, which can allow more gains to be taxed at lower rates than single filers.

How holding periods affect your capital gains rate

An asset you own for one year or less is a short-term capital gain, taxed as ordinary income at your regular tax bracket rate. An asset you own for more than one year is a long-term capital gain, taxed at 0%, 15%, or 20% depending on your income. The difference is substantial: if you are in the 24% ordinary income bracket and sell a short-term gain, you owe 24% tax; the same gain held over one year might be taxed at 15% or even 0%.

If you inherited an asset, your holding period starts the day you inherited it, not the day the previous owner bought it. This is one reason the step-up in basis matters: you inherit at today's value, then your one-year clock begins fresh. If you sell within a year, you owe short-term rates on any gain between inheritance and sale — usually small. If you wait past one year, long-term rates explore.

Delaying a sale by a few weeks or months to cross the one-year threshold can save thousands in tax. If you are considering selling an asset that is close to the one-year mark, calculate the tax at both rates before you decide.

Timing sales to stay in the 0% long-term capital gains bracket

The 0% long-term capital gains bracket exists for people whose total taxable income falls below a certain threshold. For 2024, that threshold is $47,025 for single filers and $94,050 for married couples filing jointly. Any long-term capital gain that fits within that income band is taxed at 0%.

After you turn 65, you may have years when your income is lower than usual — the first year of retirement before you claim Social Security, years when you take smaller withdrawals from retirement accounts, or years when you have no wages. In those years, you have "room" in the 0% bracket to sell appreciated assets without owing federal capital gains tax.

Example: You are 68, retired, and have $30,000 in taxable income from a pension. Your 0% bracket room is $94,050 (married filing jointly) minus $30,000 = $64,050. You can sell up to $64,050 in long-term capital gains and owe 0% federal tax. Any gain above that amount is taxed at 15%.

This strategy requires planning: you need to know your income for the year before you sell, and you need to understand how different income sources (wages, pensions, Social Security, retirement account withdrawals, rental income) count toward your taxable income. A tax professional can model different sale scenarios to show you the tax cost of each.

Donating appreciated assets instead of selling them

If you own a stock, mutual fund, or real estate that has gained value and you want to support a charity, donating the asset itself — rather than selling it and donating the cash — avoids capital gains tax entirely. You receive a charitable deduction for the full fair market value of the asset on the day you donate it, and the charity receives the asset tax-free.

This works only if the charity is a may have access to organization under IRS rules (most established nonprofits, religious organizations, and educational institutions may have access to; donor-advised funds and charitable remainder trusts also work). You cannot donate to a person, a political campaign, or a for-profit business and claim the deduction.

The deduction is limited to a percentage of your adjusted gross income — usually 30% to 50% depending on the type of asset and organization — so you may not be able to deduct the full value in one year. Unused deductions carry forward to future years. You need a written appraisal for real estate or other non-publicly-traded assets, and you must file Form 8283 with your tax return.

For someone over 65 with significant appreciated assets and charitable intent, this strategy can eliminate tax on gains worth thousands of dollars while supporting causes you care about.

Using the step-up in basis for heirs

When you die, your assets pass to your heirs at their fair market value on the date of your death (or six months later if the estate chooses). This is called the step-up in basis. Your heirs' cost basis for tax purposes is the stepped-up value, not what you originally paid.

Example: You bought stock for $10,000 in 1990. It is worth $150,000 when you die. Your heir inherits it with a basis of $150,000. If they sell it the next day for $150,000, they owe zero capital gains tax. If they sell it a year later for $160,000, they owe tax only on the $10,000 gain that occurred after inheritance.

This means you do not need to sell appreciated assets during your lifetime to avoid tax — you can hold them and let heirs benefit from the step-up. This strategy works best if you do not need the money, you expect the asset to keep gaining value, and you have heirs you want to benefit. It does not work if you need the cash now or if you have no heirs.

The step-up applies to most assets: stocks, bonds, real estate, mutual funds, and business interests. It does not explore to retirement accounts (IRAs, 401(k)s), which pass to heirs with income tax still owed on withdrawals, or to assets in certain trusts.

How marriage status affects your capital gains tax bracket

Married couples filing jointly have higher income thresholds for each capital gains tax bracket than single filers. For 2024, the 0% bracket goes up to $94,050 for married filing jointly but only $47,025 for single filers. The 15% bracket goes up to $583,750 for married filing jointly but $487,450 for single filers.

This means a married couple can realize more capital gains at lower tax rates than a single person with the same total income. If you are married and considering selling appreciated assets, filing jointly (rather than separately) gives you more room in the lower brackets.

If you are single and have a spouse, the timing of your marriage or divorce can affect your tax filing status for the year. If you marry before December 31, you file as married for that year. If you divorce before December 31, you file as single. This matters if you are planning a large sale and want to use the higher married thresholds.

Tax-loss harvesting and offsetting gains

If you own assets that have lost value, you can sell them to realize a capital loss. That loss can offset capital gains you realize in the same year, reducing your net taxable gain. If your losses exceed your gains, you can deduct up to $3,000 of the excess loss against ordinary income in that year, with any remaining loss carrying forward to future years.

This strategy, called tax-loss harvesting, is useful if you have both winners and losers in your portfolio. You sell the losers to offset the winners, then you can reinvest the proceeds in a similar (but not identical) asset to maintain your desired allocation. The IRS has a "wash sale" rule that prevents you from buying back the same or substantially identical security within 30 days before or after the sale, so you need to wait or buy something different.

After 65, tax-loss harvesting becomes more valuable because you may have more flexibility in when you sell (you are not locked into a work schedule) and you may be in a lower ordinary income bracket, making the $3,000 annual loss deduction worth more.

Frequently Asked Questions

Does Social Security count as income for capital gains tax purposes?

Social Security benefits are not counted as income for the capital gains tax brackets themselves, but up to 85% of your benefits may be counted as taxable income if your other income exceeds certain thresholds. This "provisional income" calculation affects your overall taxable income, which determines which capital gains bracket you fall into. A tax professional can show you how claiming Social Security in a particular year affects your capital gains tax.

Can I gift appreciated assets to my children to avoid capital gains tax?

Gifting an appreciated asset to your child does not avoid capital gains tax. Your child inherits your original cost basis, so if they sell the asset, they owe tax on the entire gain from your original purchase price. Gifting is useful for other reasons (removing assets from your estate, spreading wealth), but it does not reduce capital gains tax. Leaving the asset to them at death triggers the step-up in basis, which does reduce or eliminate the tax.

What is a charitable remainder trust, and does it help with capital gains?

A charitable remainder trust is a legal structure where you transfer appreciated assets to a trust, receive income from the trust for life or a set period, and the remaining assets go to a charity. You avoid capital gains tax when the trust sells the appreciated assets, and you receive a charitable deduction. This strategy is complex and requires legal setup, so it is most useful for large appreciated assets and significant charitable intent.

If I am over 65 and still working, can I use the 0% capital gains bracket?

Yes, but your working income takes up space in the bracket first. If you earn $60,000 in wages and are married filing jointly, your 0% bracket room is $94,050 minus $60,000 = $34,050. You can sell up to $34,050 in long-term capital gains at 0%. Any gain above that is taxed at 15%. Retiring or taking a year off work creates more room in the bracket.

Do I owe capital gains tax on my primary home if I sell after 65?

No, if you meet the requirements. You can exclude up to $250,000 of gain on the sale of your primary home if you are single, or $500,000 if you are married filing jointly, as long as you owned and lived in the home for at least two of the last five years. This exclusion has no age requirement and applies regardless of how old you are when you sell.