Don't Miss Out on Tax-Free Money From Stocks

Say you are married filing jointly and have $80,000 in income before taking the standard deduction. You own a low-cost stock index fund with a large unrealized long-term capital gain that you don't want to sell. Do it anyway.

If you sold enough to recognize a long-term gain of $23,150 (to get you to that $103,150), you pay no federal long-term capital gains tax. And as soon as you sell, you can immediately buy it back again. You don't have to wait 31 days as there is no wash-gain rule — only a wash-loss rule.

The reason you do this is that it resets the cost basis to that higher price and you'll have less of a gain when you later sell it to live on the proceeds. Your income may be much greater in future years if you've delayed taking Social Security (typically the right thing to do) and will later have to take the required minimum distributions from your IRA and 401(k) accounts.

This zero percent tax rate is only for federal taxes. You will likely end up paying state income taxes, but you'd probably have to pay that eventually, and state taxes are typically lower than federal taxes.

Other complications could also arise, says Mike Piper, author of Taxes Made Simple. He points out one example: If you are buying your health insurance though the Affordable Care Act exchange and receive a subsidy, that capital gain could reduce or eliminate that subsidy. Seek good tax advice for your specific situation.

The federal government doesn't have too many zero tax rates, so if you qualify and it saves you money, harvest those gains. It's a heck of a lot more fun than tax-loss harvesting.

Allan Roth is the founder of Wealth Logic, an hourly-based financial planning firm in Colorado Springs, Colorado. He has taught investing and finance at universities and written for Money magazine, the Wall Street Journal and others. His contributions aren't meant to convey specific investment advice.