Do You Pay Capital Gains After Age 65?
There is a very typical misunderstanding that capital gains tax disappears with age. However, in both federal and state systems, that belief is not accurate. It should be recognized that individuals who are 65 or older remain fully responsible for capital gains tax—Massachusetts residents included.
No Automatic Exemption for Seniors
It is true that age does not trigger a capital gains tax exemption. What matters most is how much income is generated and how long the asset was held before sale. That’s true whether the sale involves stocks or real estate. The important factors are outlined below:
The Massachusetts capital gains rate is 5% for long-term gains (held over one year)
A 12% rate applies to short-term gains or select asset types like collectibles
There is no capital gains tax age exemption in Massachusetts
Federal capital gains tax varies by income, not age
In other words, if a retiree sells an investment and recognizes a gain, the tax obligation still exists—regardless of their age or whether they are retired.
Federal vs. State Capital Gains Rules
Even if a senior qualifies for the 0% federal capital gains tax rate—available to low- and modest-income earners—the Massachusetts tax authority still applies its own rates. The flat nature of the state system signifies:
A retired person earning under the federal threshold might pay no federal capital gains tax
But they’ll still owe 5% in Massachusetts for long-term gains
So, one of the main questions “Do seniors pay capital gains tax?” result in a clear answer: yes, especially at the state level.
Exceptions Exist, But Not Due to Age
No exemption exists just for being over 65. However, specific retirees might benefit from the below elements:
Lower taxable income, which may lower or eliminate federal capital gains
Home sale exclusions for primary residences—up to $500,000 for married couples
Strategic planning to defer or lower gains through timing or reinvestment
None of these are linked to age itself. They’re linked to how the sale is structured and whether income thresholds are satisfied.
Final Thoughts
Retirees do not get an automatic pass on capital gains taxes. Whether it is mutual funds or the sale of a second home, the Massachusetts capital gains rate applies the same way at 65 as it does at 45. If you need any assistance with capital gains taxation in Massachusetts, Dimov Associates is ready to present assistance.
