Lone Tree, Colorado
Tax Planning Strategies · for investors
By Charles Trautman, EA · Reviewed October 25, 2026
Diagnosis: a brokerage account that did well, a 1099 that arrived in March, and a vague sense that the tax could have been less.
Prognosis: it could have. Most of these take a phone call in December, not April.
There is no cure for capital gains. These are the strategies.
Welcome. We’re glad to serve you.
Investment income is taxed on a different schedule from wages: long-term gains and qualified dividends at 0%, 15% or 20%; short-term gains and interest at the ordinary brackets; and a 3.8% surcharge for higher earners on all of it. The differences between those rates, and the fact that a gain is taxed only when you choose to sell, are what make investors the demographic with the most control over their own tax.
These ten strategies are ordered by how often they apply. The first three cost nothing and work for anyone with a taxable account. The last three are for specific situations (employer stock, a startup, a large estate) and are worth a great deal when they fit. Full articles are linked; the cautions for the preparer at the end are the holding periods and wash rules that undo a strategy applied carelessly.
The 2026 figure: long-term gains and qualified dividends are taxed at 0% to the extent taxable income stays under $49,450 single / $98,900 joint in 2026. Sell the appreciated fund, buy it back the same day (no wash rule for gains), and the basis resets to today’s price at no cost.
Who is in the bracket: retirees before Social Security and RMDs, a couple with one income in a gap year, anyone with a large standard deduction and modest wages. A couple with $60,000 of other income has about $38,900 of room; harvesting $38,900 of gain each year for five years resets $195,000 of basis for free. Colorado taxes the gain at 4.40%, which is the only cost. Full article: Capital Gains Tax.
↑ Back to topThe 2026 figure: realized losses offset realized gains without limit, then $3,000 of ordinary income a year; the rest carries forward indefinitely. Replace the sold position with something similar but not “substantially identical,” or wait 31 days.
Harvest losses in down markets, in every account you control, including the one at the broker who doesn’t know about the other; the wash rule reaches across accounts and into IRAs, and a repurchase in an IRA kills the loss permanently. Turn off dividend reinvestment on a position you are about to sell. A loss carryover from 2008 is still good if someone kept track; bring the old returns. The full list of carryovers is in What Carries Over. Full article: Reading Your Brokerage 1099.
↑ Back to topThe 2026 figure: a gain on an asset held more than one year is taxed at 15% (or 0% or 20%); held one year or less, at your ordinary rate, up to 37%. One day can be worth 22 points.
Check the acquisition date before selling anything with a large gain; for shares bought in lots, sell the oldest lots (specific identification, told to the broker before settlement) or the highest-basis lots, depending on the goal. Inherited property is long-term from day one. Gifted property takes the giver’s holding period. Mutual fund capital gain distributions are long-term no matter how long you’ve held the fund.
↑ Back to topThe 2026 figure: taxable bonds, REITs, actively managed funds that distribute gains, and anything producing ordinary income go in the IRA or 401(k); index funds, individual stocks held for growth, and municipal bonds go in the taxable account; the highest-growth assets go in the Roth.
The same portfolio, re-sorted among accounts, can cut the annual tax drag by a quarter to a half. Interest and REIT dividends are taxed at ordinary rates every year in a taxable account and not at all inside an IRA until withdrawal; an index fund in a taxable account defers nearly everything and gets the step-up at death. Treasuries in a taxable account at least escape Colorado’s 4.40%. The conversation belongs with the adviser, and most advisers will have it if asked.
↑ Back to topThe 2026 figure: on a lump-sum distribution of the whole plan after separation, age 59½, death or disability, take the employer stock in kind to a taxable account: pay ordinary income tax on the plan’s cost basis in the shares only; the appreciation is taxed at long-term capital gains rates when you eventually sell, and is never subject to the 3.8% surtax or RMDs.
An employee with $400,000 of company stock in the 401(k) that the plan bought for $60,000 pays ordinary tax on $60,000 now and 15% to 20% on $340,000 later, instead of ordinary tax on $400,000 as it comes out of an IRA over decades. The rest of the plan rolls to an IRA normally. The election is lost if the stock is rolled to the IRA first; the plan administrator must handle it as a lump-sum distribution in one tax year. This is one of the few decisions in retirement that cannot be undone, and it is worth a meeting before the paperwork is signed.
↑ Back to topThe 2026 figure: RSUs: income at vesting at full value, with 22% withholding that is usually too low, so sell at vest or add withholding. NSOs: income at exercise on the spread. ISOs: no regular tax at exercise, but the spread is an AMT preference, and a sale more than two years from grant and one year from exercise is all long-term gain. Restricted stock in a startup: the §83(b) election within 30 days of grant taxes the shares at today’s (low) value and starts the capital-gains clock.
The ISO trap is exercising in December at a high price, holding for the capital-gains treatment, and watching the stock fall before the AMT bill arrives in April on a spread that no longer exists; exercise early in the year, so a decline can be cured by a same-year sale (a disqualifying disposition that eliminates the AMT). The RSU trap is treating 22% withholding as the tax when the marginal rate is 32% or 35%. The 83(b) trap is missing the 30 days; there is no relief. Full article: AMT, in the phase-outs page.
↑ Back to topThe 2026 figure: donate shares held more than a year directly to the charity or a donor-advised fund: deduct the full fair market value (up to 30% of AGI), and the built-in gain is never taxed by anyone. Then buy the shares back with the cash you would have given.
A $10,000 gift of stock with $7,000 of gain saves the 15% to 23.8% on the $7,000 in addition to the deduction, about $1,000 to $1,700 more than giving cash. A donor-advised fund takes the shares in one transaction, gives the deduction this year (useful for bunching), and lets the giving happen on its own schedule. Pair with strategy 1 for assets that have gone up; give the winners, sell the losers. Full article: Charitable Giving: The Federal Rules.
↑ Back to topThe 2026 figure: gain on the sale of stock in a qualifying C corporation (acquired at original issue, active business, assets under $75 million at issuance for post-July 4, 2025 stock) is excluded from tax: 100% after five years, and under the 2025 act 50% after three years and 75% after four; up to the greater of $15 million or 10 times basis per issuer for new stock (verify the tiered exclusion and new caps).
For a founder, early employee or angel investor in a Colorado startup, this is the largest exclusion in the code and it is frequently lost by converting the company to an LLC, by exceeding the asset test at issuance, or by not holding long enough. The 2025 act made it more generous and shortened the wait; an investor with eligible stock should know the date the five years run and not sell a day earlier. Colorado conforms through federal taxable income.
↑ Back to topThe 2026 figure: 3.8% on interest, dividends, gains, rents and royalties to the extent modified AGI exceeds $200,000 single / $250,000 joint, thresholds that have not moved since 2013. Strategies: spread a large sale over two years, use an installment sale, harvest losses in the same year as the gain, fund the retirement plans that reduce MAGI, convert to Roth in years that are under the line, and hold municipal bonds, whose interest is outside both the tax and the threshold.
The threshold is a cliff at the margin: a couple at $245,000 who recognize a $60,000 gain pay 3.8% on $55,000 of it. The surtax does not apply to retirement plan distributions (which still raise MAGI) or to income from a business in which you materially participate. A real estate professional’s rental income can escape it; see the real estate professional page. Full article: NIIT, in the phase-outs page.
↑ Back to topThe 2026 figure: appreciated assets held until death pass to heirs at their date-of-death value; the gain is never taxed. An investor in their late seventies with a $400,000 gain in a stock bought in 1990 should think hard before selling it for any reason other than need; the heirs can sell it the week after with no tax.
The inverse is also a strategy: sell the losers before death, because a loss position steps down and the loss vanishes. And give the winners to charity during life, which gets the deduction, or to heirs at death, which gets the step-up; give the cash and the high-basis positions to the children now. With the estate exemption at $15 million, the step-up is worth more to almost every family than any lifetime gifting plan. Full article: Inherited Property and the Step-Up in Basis.
↑ Back to topThe 2026 figure: for property that is not traded on an exchange, land, a rental, a business, carry the buyer’s note and the gain is taxed in proportion to the principal received each year. The gross profit percentage is fixed in the year of sale; apply it to each year’s principal; the interest is ordinary income on top.
Stock and funds cannot use it (gain on a traded security is reported on the trade date), which is why this strategy is on the real estate side of the investor’s ledger. It is the only tool that moves a large gain across years without a 1031 exchange: a $400,000 gain on a rental sold for cash is one year at 20% plus 3.8%; on a ten-year note it is ten years that may never clear the $250,000 NIIT threshold or the 20% bracket. Depreciation recapture under §1245 is taxed in full in the year of sale regardless, and the 25% unrecaptured §1250 gain on a building comes out first as payments arrive. Watch the interest rate on the note against the AFR, the two-year resale rule for sales to family, and the $5 million line where the IRS charges interest on the deferred tax.
The risk, before the tax. An installment sale makes you the bank. If the buyer stops paying, your remedy is foreclosure under the deed of trust, which in Colorado runs months, costs money, and hands you back a property that may have been neglected, with taxes and insurance lapsed, and possibly a bankruptcy stay in the way. Treat the deal the way a lender would: a substantial down payment, 20% or more, so the buyer has skin in the game and you have equity under you; a credit check and proof of income; a recorded deed of trust with a due-on-sale clause; the buyer carrying insurance naming you; property taxes paid through an escrow or verified each year; a loan-servicing company or at least a written amortization schedule; and a real estate attorney drafting the note and deed of trust, not a form off the internet. The tax deferral is worth having only on a note that gets paid. We will run the tax side; the attorney and the down payment are what protect the principal.
Full article: Installment Sales and Form 6252.
↑ Back to topProbably some. Taxable income under $98,900 (joint) means long-term gains are taxed at 0% federally. With your deductions you likely have $40,000 or more of room; selling and immediately repurchasing resets your basis at no federal cost. Colorado will tax the gain at 4.40%, and the gain can raise the taxable portion of your Social Security, so we run the whole return before picking the number.
Not within 30 days before or after, in any account including your IRA, without losing the loss. Buy a similar fund from a different family instead, or wait 31 days. Turn off dividend reinvestment first; an automatic reinvestment inside the window washes part of the loss.
Not before asking about net unrealized appreciation. If the plan’s cost in the shares is far below their value, taking the stock in kind to a taxable account and rolling only the rest means paying capital gains rates on the growth instead of ordinary rates forever. Once the stock is in the IRA, the option is gone.
Appreciated stock held over a year, almost always. You deduct the full value and no one pays tax on the gain. Give the shares to the charity or to a donor-advised fund, then buy them back with the cash; your basis is now higher and your deduction is the same.
For the Tax Shop desk · the holding periods, wash rules and thresholds behind each strategy
Most of these happen in December, with the year’s income nearly known and a few weeks to act: the gains to harvest at 0%, the losses to harvest against them, the shares to give instead of cash, the Roth conversion sized under the 3.8% line. Send us the November brokerage statement and the year-to-date pay stub and we will tell you the numbers. The two that happen once, the NUA election and the 83(b) election, deserve a meeting before anything is signed, because neither can be undone.
Call 303-734-1040 or stop by the office in Lone Tree. We’ve been reading the footnotes for Douglas County and the Denver area since 1969.
Figures reflect the 2026 tax year as currently published and are rounded for readability. Items marked (verify) are to be confirmed against IRS or Colorado DOR sources before the figures freeze in December. Last updated October 25, 2026.