Key Takeaways
- A couple in their low fifties posted online that they had given notice at a job paying about $1 million, with $7.5 million invested.
- With most of that pay on their 2026 return, a $100,000 long-term gain sold this December would cost $23,800 between the 20% capital gains rate and the 3.8% net investment income tax.
- Sold in January with no paycheck and no other income, the same gain stays under the top of the 0% rate, so the tax is $0.
- The simplest fix is to hold planned sales until January, though bond interest and dividends next year count toward the same 0% line.
If you’re about to walk away from a big paycheck, check the calendar before you sell anything. A long-term gain is taxed by where it falls in that year’s taxable income, and your last year with a paycheck is usually the year it falls highest.
Consider a couple in their low fifties who just made that jump. In a post in Reddit’s r/fatFIRE forum, one of them said they’d given notice at a job paying about $1 million. They have $7.5 million invested and spend about $180,000 a year, healthcare included. “It is tough to walk away from high income of ~$1M, but I have prioritized health, life and freedom,” the poster wrote, before asking the forum for tips on how to make the transition.
Here’s one worth $23,800.
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A December sale lands on top of the paycheck
Under 2026’s long-term capital gains rates, a couple filing jointly pays 0% on gains that fall in taxable income up to $98,900, 15% up to $613,700, and 20% above that. On top of that, the 3.8% net investment income tax applies to whichever is smaller: their investment income, or the amount their modified AGI exceeds $250,000.
So let’s say they file jointly, and enough of that $1 million lands on this year’s return to put their taxable income past $613,700 before they sell anything. Then say they sell shares from a taxable account in December, with a $100,000 long-term gain in them.
Every dollar of that gain falls above the $613,700 line, so all of it is taxed at 20%, or $20,000. Their modified AGI is far past $250,000, so the 3.8% tax applies to the whole $100,000 as well, adding another $3,800. That makes $23,800 in federal tax on one sale, between the capital gains rate and the 3.8% tax.
Ouch.
In January, the same gain is tax-free
Now push the sale back a few weeks, into January. The paycheck is gone, so say the gain is the couple’s only income in 2027. Next year’s standard deduction for a joint return is $33,200, which leaves them $66,800 of taxable income ($100,000 minus $33,200).
That’s well under even this year’s $98,900 top for the 0% rate, so the whole gain is taxed at 0%. With modified AGI of $100,000, they’re also $150,000 below the line where the 3.8% tax starts. The tax on the same $100,000 gain comes to $0, and by waiting a few weeks they keep $23,800.
Spend cash in December, and sell in January
For this couple, the plan is simple: any shares with big gains in them can wait until January. December’s spending can come from cash, or from holdings that haven’t gained much. January’s sale can also be bigger. Using this year’s line, they could take another $32,100 of gain at 0% ($98,900 minus $66,800) before any of it reached the 15% band.
If I were them, I’d leave the winners alone until New Year’s and spend December enjoying the freedom they worked so hard for. A few weeks of patience for $23,800 is about as easy as money gets.
Of course, the $0 depends on what else they earn next year. The post says 25% of the portfolio is in Treasuries and bonds. That interest counts in taxable income, and so do any dividends from the stock side and any consulting pay if either of them goes back to work. A big enough year of that income would push part of the January gain into the 15% band.
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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!
