Tax Considerations When Selling
A checklist of the tax questions to ask before selling an investment in a taxable account, how low-income years can let gains be taxed at 0%, and why a tax bill shouldn't stop you from selling something you no longer want.
The short version
Before selling in a taxable account, check the account type, how long you've held the shares, which lots you're selling, whether losses can offset the gain, whether rebuying would create a wash sale, and what your income looks like this year. In a year with low taxable income, long-term gains can be taxed at 0%. But tax is only one input. A known tax bill is often smaller than the risk of keeping a position you no longer want, and investments held until death generally pass to heirs with a basis equal to their value then. Large gains may also call for estimated tax payments.
By the end of this lesson, you'll be able to
- Work through the tax questions to ask before selling
- Explain how a low-income year can allow gains to be taxed at 0%
- Weigh the tax cost of selling against the risk of holding
Why this matters
The previous lessons covered the rules one at a time. This one puts them together at the moment that matters: when you're about to sell. A few minutes with the questions below can lower the tax on a sale, sometimes to nothing. Just as important, they help keep tax in its place: one input to a decision, not the decision.
The rest of this lesson is for members
Still to come in this lesson: Questions to ask before selling, Gains at 0% in low-income years, Don't let the tax decide for you, Two more things to know, the key takeaways, and 2 quiz questions with explanations.
Membership opens every lesson in the curriculum, the capstone projects, the interactive tools, and the members-only channels in the Hyperion Entities Discord. The first lesson of every module stays free.
Go deeper
- When One Position Gets Too BigPart 5: Building a Portfolio
- Scaling Out and Reasons to SellPart 5: Building a Portfolio
- Tax-Efficient Withdrawals coming soonInvesting Through Retirement (depth track)
Notes and sources
- Internal Revenue Service. Individual retirement arrangements (IRAs). Checked 2026-09-26.
- Internal Revenue Service. Topic no. 409, Capital gains and losses. Checked 2026-09-30.
- Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses. Checked 2026-10-11.
- Internal Revenue Service. Revenue Procedure 2025-32: 2026 inflation-adjusted tax brackets, capital gains thresholds, and standard deductions. Checked 2026-10-06.
- Aswath Damodaran, NYU Stern School of Business. Historical Returns on Stocks, Bonds and Bills, with annual data through 2025 (updated January 2026). Checked 2026-10-12.
- Internal Revenue Service. Publication 551, Basis of Assets. Checked 2026-10-06.
- Internal Revenue Service. Topic no. 306, Penalty for underpayment of estimated tax. Checked 2026-10-06.