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Philanthropy

What strategies could you use now for more charitable impact—and lower taxes?

As the year draws to a close, two things become top-of-mind for many investors: taxes and philanthropy.

Did you know that by incorporating charitable donations into tax-loss harvesting strategies, you can simultaneously maximize your tax efficiency and boost your donating power?

Now is a great time to get started. The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, introduced new limitations on charitable deductions that will take effect on January 1, 2026. As a result, all else being equal, a charitable contribution made by a top-income bracket taxpayer in 2025 would be more valuable than the same contribution made in 2026.For more insights on the OBBBA, click here. 

If you’re unsure which charity you want to support, but would like to use the deduction this year, consider contributing to a donor-advised fund (DAF). Tax deductions for donations to DAFs are immediate, but the payout from the DAF to another charity can be made at a later date.

Here’s how you can combine tax-smart strategies with donating appreciated securities held long-term.

1. Tax-loss harvest to lower capital gains taxes

Tax-loss harvesting—a strategy to reduce your capital gains tax burden—refers to the process of selling a stock that has declined below its purchase price, realizing a loss and then using that loss to offset capital gains in other parts of your portfolio. (The loss must be realized; it cannot be an unrealized loss on paper alone.)

Here are two key things to remember:

  • Selling depreciated stock does not have to disrupt your long-term investing goals or your asset allocation. When selling a stock for tax purposes, you can preserve your portfolio’s objectives and maintain your desired portfolio balance by buying another stock with similar characteristics.
  • Be careful not to violate the wash sale rule. This IRS statute states that you can’t claim the loss if you buy the same or substantially identical stock or securities 30 days before—or after—the loss sale trade date.1

By intentionally realizing losses to help minimize your tax bill, tax-loss harvesting also lowers your portfolio’s overall cost basis.2

This gradual decrease of the portfolio’s cost basis over time, combined with equity markets’ historically upward direction, can leave your portfolio holding many highly appreciated stocks (with large unrealized gains)—which can limit your opportunities for further loss harvesting.

This brings us to the topic of charitable donations.

2: Consider charitably donating (some) unrealized gains

You can boost your giving even further, and reap additional tax benefits, by combining tax-loss harvesting and charitable giving (i.e., donating unrestricted publicly traded low-basis securities [meaning those bought low and now highly appreciated] with a long-term holding period).3

If you itemize deductions on your tax return instead of taking the standard deduction, donating unrestricted publicly traded stock held long-term4 may complement tax-loss harvesting and extend your tax benefits, as many donations are tax-deductible.5 You can use the tax deduction in the tax year in which the donation is made—subject to adjusted gross income limitations—with any excess charitable deductions carried forward for use in the next five years. Furthermore, the capital gains tax that would be incurred from selling the stock and donating the proceeds can potentially be eliminated—increasing the value of the charitable contribution by over 20%.6

Potential benefits of a charitable donation to a DAF in 20257

The first chart in the article shows the potential benefits of donating long-term appreciated stock, relative to selling the appreciated stock and donating the cash proceeds.

How donating appreciated securities held long-term can contribute to a tax-loss harvesting strategy

Donating securities reduces the portion of an account that is ossified by unrealized gains, improving the potential loss-harvesting outcomes as a percentage of account value (in addition to the potential benefits detailed above of donating stock to a qualified charity).

To illustrate this, we simulated a series of index-tracking tax-smart SMA portfolios (or “vintages”) that are initially funded with $1 million in cash. We consider vintages dating as far back as January 1995, with each vintage proceeding to tax-loss harvest over a 10-year period, while seeking to align with the S&P 500 Index in terms of sector exposures, stock exposures and forecast tracking error.

After 10 years, on average, a loss harvesting account would have grown to $2.4 million with a cost basis of $1.1 million and $1.3 million of its value represented by unrealized gains (about 54%).

  • At that point, if the investor contributed $250,000 in additional cash (slightly more than 10% of the overall account value), then the cost basis of the account would increase by $250,000 and the unrealized gains as a proportion of total account value would decline from approximately 54% to 49%.
  • If the investor could contribute $250,000 in cash and also donate highly appreciated shares worth $250,000 from the account, the resulting proportion of unrealized gains in the account would decline all the way to roughly 44%. This strategy may not improve tax-loss harvesting outcomes for the account in total dollar terms because the level of fresh tax lots is the same as in the cash contribution-only scenario, but it would improve the outcome as a percentage of (now reduced) account value. 

Combining charitable donations with cash contributions can improve the tax-loss harvesting outcomes

The second chart in the article shows the impact on the overall cost basis and unrealized gains in the portfolio of cash contributions alone, as well as cash contributions combined with charitable donations.
Source: J.P. Morgan Asset Management. Data as of December 31, 2023.
When evaluating the combined effect of cash contributions and charitable donations, we found—perhaps unexpectedly—that making annual contributions of 5% in cash alongside 5% in charitable donations can result in tax savings, as a percentage of the account’s initial value, comparable to making 10% annual cash contributions alone (see below). It’s important to note that this observation relates to the overall efficiency of the account as losses are realized from a smaller account balance, not the total dollar amount of losses harvested. In fact, the dollar amount of losses harvested in the 5% cash contribution scenario is quite similar to the 5% cash plus 5% donation scenario.8 We view this as a positive outcome, as it enhances account efficiency and may provide additional tax advantages beyond tax-loss harvesting, as previously discussed.

Combining charitable donations and cash contributions can improve an account’s tax efficiency:

Cumulative potential tax savings

The third chart in the article shows an analysis of the potential tax savings generated by tax-loss harvesting accounts over a 10-year period.
Source: J.P. Morgan Asset Management. Data as of December 31, 2023.

A donor-advised fund might make sense

DAFs are charitable giving vehicles that are easily established, simple to use, cost-effective and tax-efficient. You can receive an immediate itemized tax deduction for your contribution to a DAF, while having time to strategically identify the charities and causes that you’d like to donate to.

After donating appreciated stock to a DAF, you can replenish your portfolio with cash to purchase the same or similar stock. This would create fresh lots with higher cost bases, complementing the tax benefit of charitable donations—because fresh lots are more likely to go into loss territory and qualify for capturing tax losses.

Combining tax-loss harvesting with charitable donations can provide significant tax benefits while helping you make a meaningful impact on the causes you care about.

We can help

Interested in learning more about these powerful strategies? 

Fill out a contact form to connect with one of our specialists, who can guide you through the process, and tailor a plan that aligns with your needs and aspirations.

We look forward to helping you take the next step toward optimizing your investment portfolio and achieving your financial and philanthropic goals.

  • Please consult your tax advisor to see whether tax-loss harvesting is advisable with your accounts, and how potential buybacks might be done successfully. Taxes should not be the only factor to drive an investment decision.
  • Basis is generally the purchase price you paid for an asset, adjusted for certain corporate actions (e.g., mergers, stock splits, etc.) Basis helps determine the gain or loss the taxpayer realizes on the sale or other disposition of the property. 
  • Here are some key considerations when donating appreciated stock: (1) For the stock to be qualified, it generally must be unrestricted and held long-term. Under current tax laws, if a stock is held for one year or less, it’s considered a short-term holding, and an investor would only be able to deduct the cost basis, not the appreciated fair market value. (2) You must be a U.S. taxpayer who itemizes deductions on your tax return. (3) If you have various lots of the same stock, it’s possible to choose, and give to charity, the lot with the lowest basis (the highest gainer). Under current tax laws, if a stock is held for one year or less, it’s considered a short-term holding, and an investor would only be able to deduct the cost basis, not the appreciated fair market value.
  • Under current tax laws, if a stock is held for one year or less, it’s considered a short-term holding and an investor would only be able to deduct the cost basis, not the appreciated fair market value.
  • Consult your tax professional for guidance. 
  • Assumes maximum federal long-term capital gains tax rate of 20%, plus the Medicare surtax of 3.8%. In this example, comparison is made between an investor selling their holding and paying tax on the proceeds, and then donating the net proceeds versus an investor that donates their qualified appreciated stock.
  • This hypothetical example is for illustrative purposes only. Rates shown assume top tax rate at federal level, including 3.8% Medicare surtax, and doesn’t take into account any state or local taxes. The tax savings shown is the tax deduction multiplied by the donor’s income tax rate (40.8% in this example), minus the long-term capital gains taxes paid. This example assumes the taxpayer has adjusted gross income (AGI) of $1 million per year. Cash contributions to a public charity or DAF are deductible up to 60% of the taxpayer’s AGI. The fair market value of appreciated stock contributions to a public charity or DAFs are deductible up to 30% of the taxpayer’s AGI. Contributions in excess of the percentage limitation may be carried forward for use by the taxpayer in the subsequent five tax years. This example assumes there are no state income tax considerations and the deduction is not limited based on adjusted gross income.
  • This doesn’t include the additional tax benefits of the potential tax deduction itself.

IMPORTANT INFORMATION

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.​

This webpage content is for information/educational purposes only and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. 

KEY RISKS

The impact of a tax loss harvesting strategy depends upon a variety of conditions, including the actual gains and losses incurred on holdings and future tax rates.

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.

GENERAL RISKS & CONSIDERATIONS

Any views, strategies or products discussed in this content may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this content should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

NON-RELIANCE

Certain information contained in this content is believed to be reliable; however, J.P. Morgan does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this content. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this content, which are provided for illustration/ reference purposes only. The views, opinions, estimates and strategies expressed in this content constitute our judgment based on current market conditions and are subject to change without notice. J.P. Morgan assumes no duty to update any information on this website in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of J.P. Morgan , views expressed for other purposes or in other contexts, and this content should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this website shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this website shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

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Combine tax-loss harvesting with charitable donation of appreciated securities to maximize your giving and gain potential tax benefits.
Published Nov 18, 2025

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