Overview

Main Menu Name: Gain Harvesting

This calculator compares the net tax outcome of selling an appreciated asset now (in a year with a lower tax rate) versus holding the asset and selling it in a future year, assuming higher capital gains tax rates later. The goal is to help determine whether "harvesting gains"—i.e., intentionally selling now to lock in lower tax liability—results in a better after-tax outcome.

The tool projects the asset’s future value, tax impact, and net proceeds over time under two different strategies:

1. Hold and Sell Later
2. Sell Now and Reinvest Gains

In this article:

• Background
• Getting Started
• Entering Data
• Results

Background

The concept of gain harvesting is based on taking advantage of lower capital gains tax rates in a given year, such as 2025, before scheduled rate increases take effect. By selling the appreciated asset now and recognizing the gain, the taxpayer locks in the lower rate. The proceeds can then be reinvested and continue to grow.

This strategy is particularly relevant when:

• The current capital gains tax rate is temporarily low
• You expect the asset to continue appreciating
• You have unused tax exclusions, such as the 0% or 15% brackets
• You want to reposition your portfolio or take advantage of stepped-up basis rules

This calculator compares the outcomes of two key strategies:

• Hold: Keep the asset and sell it in a future year when tax rates are projected to be higher.
• Sell and Reinvest: Realize the gain now at the lower tax rate, then allow the reinvested net proceeds to grow under the new cost basis.

Getting Started

Before you begin, consider your assumptions:

• What is the expected annual growth rate of the asset?
• What are the current and future tax rates you want to model?
• What is the asset’s current fair market value (FMV) and cost basis?

The results will depend on the spread between the 2025 and post-2025 tax rates, the rate of asset appreciation, and how long the asset is held.

Entering Data

1. Tax Rate: 2025
   Enter the current long-term capital gains tax rate. This is used for the "Sell in 2025" scenarios.
2. Tax Rate: 2026 and Later
   Enter the expected long-term capital gains tax rate starting in 2026 and beyond.
3. Basis of Asset
   Enter the original cost basis of the asset (i.e., the amount originally paid or adjusted).
4. FMV of Asset
   Enter the asset’s current fair market value. This is the price it could be sold for today.
5. Assumed Growth Rate
   Enter the annual growth rate (compounded annually) that you expect for the asset going forward.

Results

The output consists of two comparison tables:

1. Hold in 2025, Sell in Year X

This table projects the asset's growth over time if you do not sell in 2025.

• FMV: Projected future value of the asset
• Basis: Original basis, unchanged
• Gain: Future capital gain
• Tax: Calculated using the future tax rate
• NET: Proceeds after paying the future capital gains tax

2. Sell in 2025, Sell Again in Year X

This table assumes you sell the asset in 2025, pay tax at the current rate, and reinvest the net proceeds.

• FMV: Grows from reinvested amount
• Basis: Stepped up to FMV at time of 2025 sale
• Gain: Taxable gain on any new growth
• Tax: Calculated using future tax rate on post-2025 growth
• NET: Total proceeds after both tax events (initial and final)

The model helps determine in which future year the "Sell Now" approach overtakes the "Hold" strategy—or whether holding the asset is better long term.