Crypto Gain Harvesting: Using the 0 Percent Bracket to Reset Your Basis

Everyone has heard of tax-loss harvesting. Fewer people know its quieter cousin: gain harvesting. In a year when your income is low, you can sell appreciated crypto, pay zero federal tax on the long-term gain, buy it back, and walk away with a higher basis for the future.

It is not a loophole. It is the 0 percent long-term capital gains bracket, used on purpose.

The bracket that makes it work

Under section 1(h), long-term capital gain that falls within taxable income below the maximum zero rate amount is taxed at 0 percent. For 2026, Rev. Proc. 2025-32 sets that amount at $98,900 for married couples filing jointly and surviving spouses, $66,200 for heads of household, and $49,450 for single filers and married filing separately. For 2025, Rev. Proc. 2024-40 set it at $96,700, $64,750 and $48,350 respectively.

These are taxable income figures, after deductions. Rev. Proc. 2025-32 lists the 2026 standard deduction as $32,200 for joint filers and $16,100 for single filers. So a married couple taking the standard deduction can have total income of roughly $131,100 in 2026 before their long-term gains leave the 0 percent band, depending on the mix.

How gain harvesting works

• Estimate your taxable income for the year without the harvest.
• Subtract it from the maximum zero rate amount. The difference is your room.
• Sell long-term crypto lots with gain up to that room. Use specific identification to pick lots with the most gain per dollar sold.
• If you want to keep the position, buy it back.
• Your new basis is the repurchase price, so future gain is measured from the higher figure.

The result: gain that would have been taxed later, potentially at 15 or 20 percent plus 3.8 percent net investment income tax, is recognized now at 0 percent federal.

Why the wash sale rule is not the problem

Selling and immediately buying back raises an obvious question. The wash sale rule in section 1091 disallows losses on sales of stock or securities when substantially identical stock or securities are bought within 30 days. It applies to losses, not gains, so it never blocks a gain harvest. And it is written for stock or securities, which ordinary cryptocurrency is not.

The repurchase does restart the holding period on the new units. That matters only if you might sell them within a year, when any further gain would be short-term.

The lot identification step is essential

Gain harvesting depends on choosing lots. If you have several lots of the same coin, first in, first out might hand you exactly the high-gain long-term lot you want. Or it might not. Make a specific identification before the sale, in the wallet or account that holds the lot, under Treas. Reg. 1.1012-1(j). For units at a broker, the relief through December 31, 2026 in Notice 2026-20 lets you make that identification or a standing order in your own records. See specific identification and standing orders.

Only long-term lots belong in a gain harvest. Short-term gain is taxed at ordinary rates even in a low year, so it does not get the 0 percent treatment.

A worked example

A married couple expects $90,000 of wages in 2026 and takes the $32,200 standard deduction. Their taxable income before any harvest is $57,800. The 2026 maximum zero rate amount for joint filers is $98,900, so they have $41,100 of room.

They hold bitcoin bought in 2020 with a large built-in gain. In December 2026 they identify and sell enough of the 2020 lot to realize $41,000 of long-term gain, and buy the same amount back the same day.

• Taxable income rises to $98,800, still within the 0 percent band. Federal tax on the $41,000 of gain: zero.
• Their basis in the repurchased bitcoin is the repurchase price, $41,000 higher than the basis of the units sold.
• If they later sell those units in a higher-income year at 15 percent, the harvest will have saved roughly $6,150 of federal tax on that $41,000.

Traps to watch

• Overshooting the band. Gain above the threshold is taxed at 15 percent. Estimate carefully, and leave a cushion for year-end income you did not expect.
• Fees. Selling and repurchasing costs fees and spread. On small harvests, costs can eat the benefit.
• Holding period reset. The repurchased units are short-term for a year.
• Other provisions tied to income. Raising adjusted gross income can affect other items on a return. Check the whole return, not just the capital gains line.
• State tax. Many states tax capital gains as ordinary income, with no 0 percent band. A federal zero can still carry a state bill. See crypto tax and state residency.
• Pairing with losses. Losses realized in the same year offset gains first, which can waste 0 percent room. Plan harvests of gains and losses together.

A year-end timeline

• October: project the year's ordinary income and deductions, and any crypto gains and losses already realized.
• November: compute the room left under the maximum zero rate amount, with a cushion.
• Early December: record specific identifications or a standing order for the lots you plan to sell.
• Mid December: execute sales, then repurchases if you want to keep the position.
• January: record the new lots with their basis and dates, and keep the trade confirmations with your tax file.

Waiting until December 31 leaves no margin for a surprise bonus or a late 1099 that eats your room. Leave yourself time.

Gifts to family in lower brackets

Some families give appreciated crypto to an adult child or parent whose income is in the 0 percent band, who then sells it. A gift carries the donor's basis for gain purposes, as the IRS FAQs (Q32) describe, and the donor's holding period can tack on (Q33), so the recipient's sale can produce long-term gain taxed at their rate. Two cautions. Gifts above the annual exclusion, $19,000 per recipient for 2026 under Rev. Proc. 2025-32, may require a gift tax return. And for children, the kiddie tax in section 1(g) can tax a child's unearned income at the parent's rates. Rev. Proc. 2025-32 sets the 2026 kiddie tax reference amount at $1,350.

Who benefits most

Gain harvesting fits years with unusually low income: early retirement before other income starts, a sabbatical, a business loss year, a year between jobs, or a year with large deductions. It also fits people whose ordinary income always sits in the lower brackets but who hold crypto bought far below today's price. For them, harvesting a slice of gain every year steadily raises basis at no federal cost.

It also suits people who expect higher income later. A professional in training, a founder before a liquidity event, or someone about to start a pension can lock in basis at 0 percent now rather than pay 15 or 20 percent later.

It is not a fit for people already well above the threshold. For them, the tools are timing, loss harvesting, and charitable giving. See crypto capital gains tax rates.

Gain harvesting and loss harvesting together

In a year with both gains and losses available, sequence matters. Realized losses offset realized gains before any 0 percent band is applied, so a loss harvested in a low-income year can waste 0 percent room that would have sheltered gain anyway. In that situation, it can make sense to harvest gains up to the band in the low year and save losses for a year when gains would otherwise be taxed at 15 or 20 percent. Run the projection both ways.

Records

Document the identification, the sale, the repurchase, and the new basis lot. When you eventually sell the repurchased units years from now, the higher basis is only as good as the record that proves it. See crypto record-keeping.

Frequently asked questions