Zero Bracket
Tax Glossary Term
Definition
A zero bracket is an income range that is effectively taxed at a 0.0% rate, either by explicit statute or by the interaction of deductions and rate schedules. The most visible federal zero bracket in 2026 is the 0% long-term capital gains rate, which applies to single filers with taxable income up to $49,450. The standard deduction creates another implicit zero bracket for ordinary income: the first $16,100 of a single filer's gross income is shielded from income tax entirely, producing $0 in federal liability on that slice. Some states also have explicit zero brackets where income below a certain threshold is taxed at 0%, which functions differently from an exemption because the rate schedule still starts at zero rather than skipping the first dollars of income. The distinction matters: a true exemption reduces taxable income, while a zero bracket means the income is included in the base but taxed at nothing. The OBBBA deductions for qualified tips (up to $25,000) and overtime premiums effectively expand the zero bracket for workers who earn those types of income, by removing additional dollars from the taxable base before rates apply.
Example
Single filer with $30,000 in long-term capital gains and no other income in 2026:
Gross income: $30,000
Standard deduction: -$16,100
Taxable income: $13,900
The 0% capital gains rate applies to taxable income up to $49,450.
Since $13,900 is well under $49,450, federal tax on these gains = $0.