2025 Year-End Tax Strategies for Cutting Stock Portfolio Taxes

Here’s the basic idea behind the tax-saving strategies for your stock portfolio:

• Avoid the high taxes (up to 40.8 percent) that apply to short-term capital gains and ordinary income.
• Reduce your tax rate to zero—or if that’s not possible, reduce it to 23.8 percent or less by ensuring your profits qualify for long-term capital gains treatment.

Think about it: paying 40.8 percent instead of 23.8 percent means you’re paying taxes at a rate that is 71.4 percent higher.

If you can avoid that higher rate by making simple adjustments to your portfolio, it makes sense to act now.

Big Picture

Here are the seven core tax rules you must understand to uncover tax savings in your stock portfolio:

1. Short-term capital gains and ordinary income are taxed at federal rates up to 40.8 percent (37 percent top bracket plus the 3.8 percent net investment income tax).
2. Long-term capital gains are taxed at rates between 0 percent and 23.8 percent depending on your income.
3. Stock dividends are also taxed at rates between 0 percent and 23.8 percent depending on your income.
4. If your capital losses exceed your capital gains, you can deduct up to $3,000 against ordinary income and carry remaining losses forward indefinitely.
5. You must net long-term gains and losses first before applying short-term offsets.
6. If you itemize deductions, you can deduct the fair market value of appreciated stock donated to a qualified charity.
7. If you itemize deductions, you may also deduct the fair market value of depreciated stock donated to a qualified charity.

Now let’s explore six powerful year-end tax-planning strategies.

Strategy 1: Properly Offset Gains and Losses

Review your portfolio for stocks you want to sell and match short-term capital gains (taxed at up to 40.8 percent) with long-term losses (which are taxed at up to 23.8 percent).

This allows you to eliminate high-rate gains with lower-rate losses and keep the net difference.

Strategy 2: Properly Use Long-Term Losses

Long-term losses can help you create the annual $3,000 deduction allowed against ordinary income.

You’re using a loss taxed at up to 23.8 percent to offset income that may be taxed at up to 40.8 percent—a significant tax advantage.

Strategy 3: Avoid the Wash-Sale Rule

Avoid triggering the wash-sale rule.

If you sell a stock at a loss and buy substantially identical stock within 30 days before or after the sale, the IRS disallows the loss. Instead, the loss increases the basis of the newly purchased stock.

If you want to use a loss for 2025, you must sell the stock and wait more than 30 days before repurchasing it.

Strategy 4: Make Use of Lower Tax Brackets

If you financially support your parents or adult children (not subject to kiddie-tax rules), consider giving them appreciated stock instead of cash.

If they are in a lower tax bracket, you achieve a win-win:

• You give them stock.
• They sell it at their lower tax rate.
• They pay tax on dividends or gains at lower rates than you would.

Below are the 2025 dividend and long-term capital gains tax brackets by filing status:

0 percent rate

• Single: $0 to $48,350
• Married filing jointly: $0 to $96,700
• Head of household: $0 to $64,750

15 percent rate

• Single: $48,351 to $533,400
• Married filing jointly: $96,701 to $600,050
• Head of household: $64,751 to $566,700

20 percent rate

• Single: $533,401 and above
• Married filing jointly: $600,051 and above
• Head of household: $566,701 and above

Don’t forget to consider the additional 3.8 percent net investment income tax if applicable.

Strategy 5: Donate Appreciated Stock to Charity

If you donate to charity, consider giving appreciated stock instead of cash because you receive more tax benefit:

• You deduct the full fair market value of the stock (if you itemize).
• You avoid paying capital gains taxes on the appreciation.

Example

You bought a stock for $1,000 that is now worth $11,000. If you donate it:

• You receive an $11,000 charitable deduction.
• You avoid tax on the $10,000 gain.

Three important rules:

1. Deductions for appreciated stock donations to charities are capped at 30 percent of your adjusted gross income.
2. Amounts above the limit may be carried forward for up to five years.
3. You must itemize deductions to receive the tax benefit.

Strategy 6: Don’t Donate Stock Losses to Charity

Never donate stock that has declined in value, because you lose your tax-deductible loss.

Instead:

• Sell the stock.
• Deduct the loss.
• Donate the cash proceeds for a charitable deduction.

Example

You bought a stock for $13,000 that is now worth $2,000.

If you donate the stock:

• You deduct $2,000
• You lose your $11,000 deductible loss

If you sell first and donate the cash:

• You deduct the $2,000 donation
• You deduct the $11,000 capital loss

Same gift to charity. More tax savings for you.

Takeaways

Your stock portfolio offers six excellent year-end tax planning opportunities.

For example, if you donate to charity or support parents or adult children, using appreciated stock instead of cash keeps more tax dollars within your family.

You should actively plan how to offset gains and losses in your portfolio. With thoughtful planning, you create free tax savings and make your year-end investing far more efficient.

Since stock trades require time to settle, complete your tax-motivated transactions well before year-end—preferably before December 19, 2025.

‍