Key Takeaways
- A couple earning $450,000 a year plans to retire by selling $500,000 of stock from a taxable brokerage account, and that sale carries $142,857 of long-term gain.
- If they sell in a year with both paychecks, that gain owes $28,205 in federal tax, since part of it lands in the 20% bracket and all of it owes the 3.8% net investment income tax.
- If they sell in the first year after the last paycheck, with only their $80,000 of passive income, the same gain owes $13,764 under 2026’s brackets, a saving of $14,441.
- The saving holds only if the year of the sale stays a low-income year, so the couple would pay for that year’s spending from cash and leave their tax-deferred accounts alone.
If you’re about to sell a big block of stock to fund your retirement, I have some good news: picking the right year to sell could cut your federal tax bill on the sale by more than half.
On Monday, a poster in Reddit’s r/Fire forum laid out their household’s numbers, and those numbers show exactly how much. The couple earns $450,000 a year from two W-2 jobs, plus $80,000 of passive income. They’ve saved $4.14 million: $2.82 million in tax-deferred accounts, $980,000 in a taxable brokerage account with about $700,000 of cost basis, and $340,000 in cash.
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Retire now, or grind it out
They live in a very expensive area and spend $12,000-$14,000 a month. They still owe $1.05 million on a house worth $3 million, at a fixed 2.6%, with a $5,000 monthly payment. Their plan is to retire by pulling $500,000 out of the brokerage account and their cash, then recasting the mortgage to a much smaller payment. The alternative, in the poster’s words, is to “grind for 2-3 more years paying monthly $5k (as long as employer is giving paycheck) and ride out the AI bust.”
So let’s say the whole $500,000 comes from selling shares held for more than a year, spread evenly across the account. The account holds $280,000 of gains on $980,000, so $142,857 of that $500,000 sale is taxable gain. Whichever path they pick, they’ll owe far less tax on that gain in some years than in others.
Gains cost more in a paycheck year
Long-term gains get their own tax rates. The rate depends on where the gain falls once it’s stacked on top of everything else you earn that year. For 2026, a married couple filing jointly pays 0% on gains up to $98,900 of taxable income, 15% up to $613,700, and 20% above that. There’s also a 3.8% net investment income tax. It’s charged on the lesser of a couple’s investment income or the amount their modified AGI runs over $250,000.
So the same dollar of gain can be taxed at 0% in one year and 23.8% in another. And since a W-2 paycheck counts toward both taxable income and modified AGI, the paycheck years are the expensive ones to sell in.
Same shares, $14,441 apart
Filing jointly with the $32,200 standard deduction and both paychecks, the couple’s taxable income is $497,800 before the sale ($450,000 plus $80,000, less the deduction). The first $115,900 of the gain fills the 15% band up to $613,700, and the other $26,957 lands in the 20% band. Their income is far above $250,000, so all $142,857 owes the 3.8% too.
In a year with only the $80,000, their taxable income before the sale is $47,800. That leaves $51,100 of room in the 0% band, so that much of the gain is tax-free, and the remaining $91,757 is taxed at 15%. Their modified AGI comes to $222,857, under the $250,000 line, so the 3.8% never applies.
Here are the two years side by side:
| Metric | Sell with both paychecks | Sell after the last paycheck |
|---|---|---|
| Taxable income before the sale | $497,800 | $47,800 |
| Gain taxed at 0% | $0 | $51,100 |
| Gain taxed at 15% | $115,900 | $91,757 |
| Gain taxed at 20% | $26,957 | $0 |
| 3.8% net investment income tax | $5,429 | $0 |
| Federal tax on the gain | $28,205 | $13,764 |
In a paycheck year, the gain owes $28,205 between the 15% and 20% rates and the 3.8% tax. In the first year without paychecks, it owes $13,764 at 15% alone. Selling the same shares in that year keeps $14,441 in the couple’s pocket.
The wait can be short
Tax brackets run on the calendar year, so “after the last paycheck” really means the first January after it. If the last day of work falls in December, the sale only has to wait a few weeks. The mortgage recast can wait too, since the $340,000 in cash covers the $5,000 payment in the meantime.
The catch is that the year of the sale has to stay a low-income year. Every dollar they withdraw from the $2.82 million in tax-deferred accounts that year counts as ordinary income. Each one pushes a dollar of the gain out of the 0% band and into the 15% one. And past $27,143 of extra income, their modified AGI crosses $250,000 and the 3.8% tax comes back. Fortunately, their $340,000 of cash covers more than a year of spending at the top of their range, even with the full mortgage payment ($19,000 a month, or $228,000 a year). So they can leave the tax-deferred accounts alone that year.
Use the quiet years
For me, this one’s easy. Whether they retire now or grind for two or three more years, I’d hold the sale for the first January without a paycheck, since a few weeks of patience worth $14,441 is about as easy as tax savings get.
But they shouldn’t wait much longer than that. In seven years, the poster expects a Social Security benefit and a pension to start paying about $80,000 a year. Three years after that, a second Social Security check would bring the total to $120,000 a year. The years between the last paycheck and those first checks are when this couple’s gains are cheapest to take.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
