Selling a business can open a brief window to reposition appreciated investments before retirement income and distributions push tax rates higher.
Capital gain harvesting can help business owners use lower-income years after selling a business to reduce future capital gains tax liabilities. At First American Bank, I often see the sale itself receive careful planning while the years immediately afterward receive far less attention, even though the transition can create a rare opportunity for proactive planning.
What Is Capital Gain Harvesting and Can You Repurchase the Investment?
Capital gain harvesting is the intentional sale of an appreciated investment during a year when an investor's long-term capital gains rate is lower than usual. The investor realizes the gain, pays any applicable tax, and may repurchase the investment to establish a higher cost basis.
A common question is whether the investment can be repurchased after the gain is realized. In many cases, the answer is yes. Unlike wash-sale rules, which apply to losses, investors can generally repurchase an appreciated security immediately after realizing a gain. For 2026, the federal long-term capital gains rate may be 0% for taxpayers with taxable income less than $49,450 for most single filers and $98,900 for married couples filing jointly.
Why Are the Years After Selling a Business Important for Tax Planning?
Many business owners I work with spend decades reinvesting in their companies, whether they are adding equipment, expanding distribution, or preparing for international growth. Since 80% to 90% of a privately held business owner’s net worth is often concentrated in their business, they may reach a sale without substantial retirement accounts or a broadly diversified portfolio.
The transaction itself can create a significant capital gain, but taxable income may fall sharply in the years that follow before retirement distributions, Social Security benefits, consulting income, or other income sources begin.
That gap can present a valuable planning window. Consider a married business owner with $70,000 in taxable income after selling a company in 2026. Depending on the couple's overall tax situation, they could realize an additional $28,900 in long-term capital gains while remaining within the 0% federal capital gains tax bracket. By recognizing those gains during this temporary low-income period, they may be able to reset their cost basis and avoid approximately $4,335 in federal taxes that could apply if the same gains were realized later at a 15% rate.
A Three-Step Post-Sale Review
1. Map the income window
Project taxable income between selling the business and future income events, including consulting payments, pensions, Social Security, and retirement distributions.
2. Review appreciated investments
Identify investments with significant unrealized gains and determine whether realizing some of those gains during lower-income years could support your long-term tax strategy.
3. Coordinate before year-end
Review the plan with tax, legal, and wealth advisors before December 31st. State taxes, net investment income tax, Medicare premiums, charitable plans, and portfolio distributions can change the result.
Make the Post-Sale Window Part of the Plan
Selling a business is often one of the most important financial events in an owner's life. While much attention is understandably focused on completing the transaction, the years that follow may create planning opportunities that can have a lasting impact on after-tax wealth.
A coordinated review can help determine whether capital gain harvesting fits within a broader strategy for diversification, retirement income, and long-term financial goals. First American Bank helps bring the right professionals into the conversation as you prepare for the next phase.
