William F. Davis, CFP® | Vericrest Private Wealth
On October 6, the S&P 500 closed at a record 7,818.93. If your portfolio looks anything like the market, you are probably sitting on some of the largest unrealized gains you have ever had. That is a good problem to have, and the tax code, being the tax code, has already figured out how to turn it into a slightly less good one.
The good news is that between now and December 31 you have more control over the bill than most people realize. Gains, losses, charitable gifts and even who owns a stock can all be adjusted before the year closes. After January 1, most of those options are gone. This is not about letting the tax tail wag the investment dog. It is about making sure that, whatever you were going to do anyway, you do it in the most tax-efficient way.
First, Know What a Gain Actually Costs
Long-term capital gains (assets held more than a year) are taxed federally at 0, 15 or 20 percent in 2026. For a married couple filing jointly, the 20 percent rate starts at taxable income above $613,700. Then there is the 3.8 percent Net Investment Income Tax, which applies once modified adjusted gross income passes $250,000 for joint filers ($200,000 single), and those thresholds have never been adjusted for inflation. For many households in the $5 to $10 million range, the real federal rate is 18.8 or 23.8 percent, with Pennsylvania’s flat 3.07 percent on top.
The chart below shows what that looks like on a $100,000 gain, and what happens if the shares are donated instead of sold.
Harvest Losses, But Carefully
Almost every portfolio has a few positions that are underwater, even in a record year. Selling them realizes a loss that offsets realized gains dollar for dollar, and if losses exceed gains, up to $3,000 can offset ordinary income, with the rest carried forward. Think of it as getting paid, in tax savings, for admitting a mistake.
Two cautions. First, the wash-sale rule disallows the loss if you buy the same or a substantially identical security within 30 days before or after the sale, and that includes purchases in your spouse’s account or your IRA. Second, the replacement investment still has to belong in the portfolio. A loss that leaves you with the wrong holdings is a bad trade with a nice tax receipt.
Give the Shares, Not the Cash
If you are charitably inclined, this is the cleanest move in the playbook. Donating long-term appreciated stock directly to a charity, or to a donor-advised fund, means you never pay tax on the gain, and you generally deduct the full market value if you itemize. Writing a check from cash while holding low-basis stock is the more expensive way to be generous.
A donor-advised fund adds flexibility. You fund it this year, take the deduction this year, and recommend grants to charities over the following years at whatever pace you like. One practical note: funding with securities takes time to process, so waiting until the last week of December is a gamble.
The New Charitable Math Rewards Bunching
The 2025 tax law changed the rules for 2026 in ways that mostly shrink the benefit of giving. Itemizers now lose the first 0.5 percent of their contribution base (generally adjusted gross income) before gifts count. Taxpayers in the 37 percent bracket also see the value of their itemized deductions capped at 35 percent. On the other side, the 60 percent of AGI limit on cash gifts to public charities was made permanent, and non-itemizers can now deduct up to $1,000 ($2,000 joint) in cash gifts.
The takeaway is that spreading modest gifts evenly across years is now less efficient. Concentrating several years of giving into one year, ideally by funding a donor-advised fund with appreciated stock, helps you clear the floor, makes the deduction large enough to exceed the standard deduction, and still lets the charities receive their money on a schedule. If you are 70½ or older, qualified charitable distributions directly from an IRA sidestep the floor and the cap entirely and count toward required minimum distributions.
Gifting Appreciated Stock to Family
Giving appreciated shares to an adult child or other family member in a lower tax bracket can move the gain to someone who pays less on it. The 2026 annual gift tax exclusion is $19,000 per recipient, so there is real room to work with. The caveats are real as well: the recipient takes your original cost basis, the gift is permanent, and the kiddie tax can undo the benefit for young children. Whether it makes sense depends on whether the gift is something you would do anyway. Handing over assets purely to save tax is a poor reason to lose control of them.
What Actually Helps
Pull a realized gain and loss report now, not on December 28. You cannot plan around numbers you have not seen.
Identify which lots have the highest cost basis. When you do sell, choosing specific lots can lower the gain, and many custodians default to a less favorable method.
If you plan to give to charity at all, decide this month whether to do it with appreciated stock, and whether a donor-advised fund fits.
Check where the gains are held. Gains inside an IRA or 401(k) are not the problem. The ones sitting in a taxable account are.
Coordinate with your CPA before year-end, not after. Estimated tax payments, a Roth conversion and a large gain all interact, and the best time to find out how is while there is still time to change something.
Why Now
Markets at record highs feel like a reason to relax. They are really a reason to look at the bill. Tax decisions for 2026 get locked in on the last trading day of the year, and trades, transfers and gifts all take longer than they should. A record-breaking year only turns into a smart tax year if someone does the planning while there is still time.
If you have significant gains in a taxable account and want to see what the options look like, let’s talk before December, not after.
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William F. Davis is a CERTIFIED FINANCIAL PLANNER™ and Managing Partner with Vericrest Private Wealth LLC, a financial advisory firm in Newtown, Pennsylvania.
Vericrest Private Wealth LLC (“Vericrest”) is an SEC registered investment advisory firm. The information provided herein should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or investment advisory service. Past performance is no guarantee of future results, and there is no guarantee that future investments will be profitable. While we believe that third party information provided is accurate, Vericrest does not guarantee or otherwise warrant such information. For more information please contact Vericrest or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov) to review important disclosures about our firm.
