Harvesting Capital Gains Vs. Roth Conversions Decisions – What Will Have The Least Tax Impact: Harvesting Capital Gains Or Roth Conversions? (2026)

2026 · WHAT WILL HAVE THE LEAST TAX IMPACT:
HARVESTING CAPITAL GAINS OR ROTH CONVERSIONS?
Will you need the income or assets from your retirement accounts?NoYesDo you have negative taxable income (i.e., your deductions exceed your income)?Are you in the 10% or 12% tax bracket this year?NoYesNoYesAre you charitably inclined or inclined to hold appreciated securities until you pass away?Are you receiving Social Security retirement benefits, and will harvesting LTCGs cause your combined income to rise above $25k ($32k if MFJ)?YesNoYesNoAre you in the 22% or 24% tax bracket this year?You are in the 32%, 35%, or 37% tax bracket this year...Consider harvesting LTCGs from your taxable investment accounts.Consider harvesting LTCGs until your taxable income reaches $49,450 ($98,900 if MFJ).Consider doing Roth conversions until you fill up the 22% or 24% tax bracket.Consider doing Roth conversions to use any deductions that will be permanently lost and harvesting LTCGs until your taxable income reaches $49,450 ($98,900 if MFJ).Consider doing Roth conversions. The LTCGs in your taxable investment accounts will be eliminated if they are donated to charity or if held until your passing.Harvested LTCGs would be taxed at 15% or 20%, versus the 32%, 35% or 37% rate that would apply to Roth conversions.This may reduce your risk of reaching the 32% tax bracket in the future.Be mindful of state tax implications.Be mindful of state tax implications.It is likely still more tax-efficient to harvest LTCGs than to do Roth conversions.Harvested LTCGs would be taxed at 0%, but you may be subject to the phase-in of income tax on your Social Security benefits.Consider harvesting LTCGs until your taxable income reaches $49,450 ($98,900 if MFJ).Harvested LTCGs would be taxed at 0%, versus the 10% or 12% rate that would apply to Roth conversions.When MAGI is over $200k ($250k if MFJ), LTCGs will be subject to the NIIT, an additional 3.8% Medicare surcharge.When MAGI is over $109,000 ($218,000 if MFJ), you may be subject to IRMAA surcharges in two years. See the “Will I Avoid IRMAA Surcharges On Medicare Part B & Part D?” flowchart for details.Consider the future tax brackets of your heirs (if applicable) if you plan to earmark your retirement accounts as part of your inheritance plan.NoYesSTART HERE
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 Dejan Ilijevski, MBA, MS

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