Investment Strategy

There are 3 common ways to pay taxes. Here’s how to consider what may be right for you

We evaluate the options: Using a line of credit, selling investments or using available cash this tax season.

Published March 11, 2026

Joe Bakalian, Head of Mid-Atlantic and Ohio Lending

Taxes are a certainty, as we know. Less certain: the best way to pay them.

Would it make sense to borrow on a portfolio line of credit, secured by marketable securities? What about selling some securities from a portfolio? What about using available cash? It depends on your wealth plan, financial goals, the markets, your liquidity, your tax obligations and more.

The most sensible approach can even change from year to year.

We break down some of the pros and cons of different options. Consider them—and discuss it with your J.P. Morgan team.

Should you pay taxes with a line of credit?

A portfolio line of credit—a flexible, revolving loan you can draw upon as needed—can be a practical way to access liquidity without having to sell your investments. By using your marketable securities portfolio as collateral, you can generally borrow funds quickly, often at compelling rates. This approach allows you to manage short-term needs—paying taxes is one example—while keeping your investments intact for future potential growth or other opportunities.

The pros: Why a line of credit may be a prudent move

One of the main advantages of a line of credit is the flexibility it gives you to operate with intention. A line of credit can give you breathing room to pay your tax bill without selling investments or dipping into your liquidity bucket. Leaving your portfolio intact means you won’t have to give up possible market gains or disrupt the long-term financial plans you’ve carefully built.

Many clients pay taxes quarterly, not just in April, so having a line of credit in place can help you handle surprises—whether it’s an unexpected expense or a new investment opportunity. With a line of credit, you can choose to borrow amounts that makes sense for you based on your risk appetite, cash needs, portfolio size and asset allocation.

Finally, a line of credit’s flexibility can align well with the irregular income streams some people may experience: You can draw what you need, as you need, and repay it when income flows in.

Considerations when using a portfolio line of credit

Portfolio lines of credit should, we believe, have intentional borrowing boundaries established that serve to advance your overarching plan. For example, an investor with a balanced portfolio might consider borrowing up to 15% of its value; an investor with a growth-focused, more volatile portfolio might consider borrowing up to 10%.

Borrowing on a line of credit would change your overarching financial picture and that requires prudent management. Of course, using a line of credit isn’t one-size-fits-all, and borrowing without intention could increase your financial risk. Your team can help you understand how to carefully consider the implications and structure your borrowing with your desired outcomes in mind.

Should you pay taxes by selling securities?

Selling investments to pay taxes may seem like a straightforward option. It is a direct way to generate funds. However, here are some things to keep in mind.

The upside: When selling securities might work

If you have losses in your portfolio and sell the investments that have lost value, you can potentially use the loss to offset gains elsewhere.¹ The technique may reduce your tax bill next year, or in the future.

Considerations before you sell

What if your portfolio has done quite well? Selling assets that have appreciated can trigger capital gains taxes, increasing your tax bill in the future. You may have to sell your most liquid investments. That could pull your portfolio off track, potentially leading to unintended consequences.

Over the last three years, the market environment has been strong, which suggests that selling now could mean missing out on growth in the near term. If you want to buy back in later, prices may have risen. This is a meaningful opportunity cost.

Should you pay taxes with cash?

Paying taxes with cash may be a prudent move—if you have a thoughtful liquidity strategy. Knowing how much cash you truly need helps you see what’s “excess” and available for obligations including taxes.

The upside: When cash might be a wise choice

Using cash keeps your investment portfolio intact. If you have an appropriately sized liquidity bucket to support your needs, including tax payments, paying taxes with cash could be efficient and straightforward.

If you have a plan for your cash—for example, investing it in assets with a higher expected return than the cost of borrowing—it might make sense to use the cash for taxes and consider borrowing separately when you may have an opportunity to deduct the interest.²

Considerations: Why cash might not be optimal

Using too much cash from your liquidity bucket without sufficient planning could leave you short when unexpected new opportunities or expenses come along. You may also need to consider how to replenish your cash, and where that would come from.

Without a clear liquidity plan, you risk reducing your financial flexibility.

Conclusion: The power of choice

Whether you use a line of credit, the proceeds from selling securities or your available cash, it’s important to be intentional. When you use the right strategy for you, meeting your tax obligations can do double duty: Satisfy the payment and help you meet your long-term goals.

We can help:

Your J.P. Morgan team can help you weigh the challenges of each choice and pick the right approach, or combination of approaches for you. A thoughtful wealth plan can help you prepare for your taxes and ensure you’re prepared for future obligations.³

Ready to discuss?

Contact us

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Speak with your tax advisor to confirm the tax treatment applicable to your situation.
Consult your certified public accountant for specific tax advice and to confirm the applicable tax treatment for you.
Consult your advisors, including your tax advisor, to see what may be applicable in your 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.

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