Taxes
Mar 3, 2025
Investment Strategy
The hidden cost of selling securities to pay taxes
Solving today’s problem can create tomorrow’s challenges. Consider these ideas at tax time to protect your portfolio’s potential.
Published March 17, 2026
Joe Bakalian, Head of Mid-Atlantic and Ohio Lending
A tax bill forces a decision: How exactly will you pay it?
Selling securities to fund your tax bill is a straightforward choice, but its simplicity can mask real costs and could significantly impact your wealth plan.
Here we discuss three hidden costs of selling securities to pay taxes and provide our guidance on preserving optionality. This tax season, keep your options open so you have choices now and later.
Cost #1: Creating taxes by paying taxes
The tax challenge of appreciated securities is nothing new. But it’s especially relevant today given the equity market gains of the past three years.
When selling appreciated securities, you realize a taxable gain. That can create a vicious cycle: If you sell appreciated securities to pay taxes, those gains impact your taxes the following year.
Using a line of credit secured by a marketable securities portfolio creates flexibility. You can meet your tax obligation while also leaving your portfolio intact. There’s generally no taxable event and your securities that are doing well remain in place, to potentially capture more upside.
Cost #2: Portfolio drift
Selling investments to meet a tax obligation can disrupt your portfolio allocations. Many investors, we’ve observed, often choose to sell what’s most liquid—such as ETFs—to meet a looming deadline. Selling securities without a thoughtful plan can reduce your portfolios’ diversification, shift your asset allocation off target and potentially derail elements of your wealth plan.
Strategies like borrowing with a line of credit or using excess cash leave your investment portfolio intact, eliminating unwanted drift.
If you choose to sell, consider a tax-loss harvesting strategy. Very generally, that means first selling underperformers and intentionally realizing losses. Then (not part of tax loss harvesting but in our tax case) you’d pay your tax bill. The next step to harvest the loss would be reinvesting any remaining proceeds in similar securities to comply with IRS rules.1 While meeting regulations, you’d also be retaining your investment strategy. This approach may help offset next year’s tax burden.2
The key is to be intentional in your plan.
Cost #3: Opportunity cost
You’ve built a portfolio you believe in, one that’s meant to help you achieve your goals over the long term. Selling those securities may undermine the upside that portfolio could achieve. A sale of high-conviction securities with embedded gains—that you bought for a reason—can be costly. What may be lost is the compounding effect, forgoing the potential gains on gains that would be realized by staying invested.
Conclusion: Keep your options open
Paying taxes using a portfolio line of credit secured by marketable securities gives you flexibility to handle tax events, now and in the future, while keeping your investment strategy on track.
Selling securities to pay taxes involves costs that may not be so obvious, especially when you have securities in your portfolio with embedded gains. Using cash, on the other hand, may disrupt your liquidity position, which could be unfortunate if needs arise, such as making opportunistic investments or managing personal expenses.
Whether you intend to borrow, sell securities or use your available cash, we believe in acting with informed intention and preserving your wealth plan—at tax season and the rest of the year. Reach out to your J.P. Morgan team to build an intentional plan, for tax season and beyond.
Ready to discuss?
Tax Strategy
Lending
Jun 11, 2025
The Power of a Resilient Portfolio Maintaining Access to Liquidity Even in Volatile Markets
-
The Internal Revenue Service’s “wash sale rule” lets taxpayers claim a loss on a security sold if a "substantially identical" security is purchased outside a 61-day window: from 30 days before the sale through the day of the sale and extending to 30 days after the sale. Purchasing inside that 61-day window would void the tax deduction for that loss.
-
Consult with your tax advisors about how tax-loss harvesting may be applicable in your individual situation.
Key Risks
JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.
Loans collateralized by the securities in your investment account(s) involves certain risks and may not be suitable for all borrowers. J.P. Morgan assigns values to these securities and, at any time and without notice to you, may increase or decrease these values or change the eligibility of these securities as collateral. A decline in the value of these securities collateralizing your Line of Credit (whether due to a market downturn, market volatility or otherwise) directly impacts the amount of credit available to you and may require you to provide additional collateral and/or pay down your Line of Credit in order to avoid the forced sale of these securities by J.P. Morgan. In addition, there are limitations on the percentage of cash and cash equivalents (relative to marketable securities) that can secure your Portfolio Line of Credit. Please review these and other risks in more detail and/or in conversations with your J.P. Morgan team, and make sure to read your Line of Credit documentation carefully so that you fully understand your obligations and the risks associated with this opportunity.
Tax loss harvesting may not be appropriate for everyone. If you do not expect to realize net capital gains this year, have net capital loss carryforwards, are concerned about deviation from your model investment portfolio, and/or are subject to low income tax rates or invest through a tax-deferred account, tax loss harvesting may not be optimal for your account. You should discuss these matters with your investment and tax advisors.
