Ways to reduce or defer capital gains tax on stocks
Natan Benchimol
Brokerage Operations Lead
Sell a stock for more than you paid, and the IRS is entitled to a piece of that gain. That's just how it works, and there's no getting around it once the sale is done.
A capital gains bill isn't something you can dodge forever, so the real question becomes: how do you shrink or postpone what you end up owing?
What actually triggers capital gains tax
You owe capital gains tax on the profit between your sale price and what you originally paid, your cost basis. How long you held the position drives what rate applies:
- Short-term, meaning one year or less: taxed like ordinary income, at your normal tax rate.
- Long-term, meaning more than a year: taxed at 0%, 15%, or 20% federally depending on income, plus whatever your state adds.
Sell one day too early and you could pay your full ordinary rate instead of the lower long-term one. Worth double-checking the calendar if you're anywhere near that one-year line.
You won't avoid the tax, but you can shrink or delay it
Wait past the one-year mark
Simplest move available: hold until you clear one year, so the gain qualifies for long-term treatment instead of ordinary rates. The gain itself doesn't shrink, but the rate applied to it usually does.
Harvest your losses
Other positions sitting at a loss? Selling them locks in a capital loss you can use to offset gains elsewhere in your portfolio. The wash-sale rule blocks the deduction if you rebuy a "substantially identical" security within 30 days before or after the sale, so this strategy only works if you can sit out that position for a bit.
Give the shares away
Send appreciated stock straight to a qualified charity, often through a donor-advised fund, and you skip capital gains tax on those shares entirely while picking up a deduction for their current value. The catch is permanence. Once it's donated, it's gone from your portfolio for good, so this only makes sense for the slice of a position you already meant to give up.
Move into an exchange fund
If you're sitting on a large, appreciated position, not a few thousand dollars, but something that triggers a genuinely painful tax bill on sale, an exchange fund offers a different kind of relief. Rather than selling for cash, you swap your shares into a pooled fund for a diversified stake. Because it's structured as an exchange and not a sale, no capital gains tax comes due when you contribute. That deferral, under Section 721 of the tax code, holds for as long as you stay in, after which you redeem a diversified basket of holdings and carry your original cost basis forward.
Sitting on an appreciated, concentrated position? Glidepath offers a way to diversify without the immediate tax hit. See if you qualify.
Weighing your options
| Strategy | Mechanics | Fits best | Tradeoff |
|---|---|---|---|
| Wait past one year | Hold for long-term rate treatment | Positions nearing the one-year mark | Time (the gain still gets taxed, just at a friendlier rate) |
| Give the shares away | Donate appreciated stock to charity | Investors with real charitable intent | Permanent (you don't keep the value or the shares) |
| Harvest losses | Offset gains with losses elsewhere | Investors already holding unrealized losses | Capped by available losses; wash-sale rule limits re-entry |
| Exchange fund | Swap shares for a diversified stake, no sale | Large, concentrated positions | Liquidity (a multi-year hold, typically seven years, to keep the deferral) |
Why an exchange fund wins for large concentrated positions
Each strategy above chips away at one piece of the problem. Waiting helps the rate. Loss harvesting only offsets whatever losses you happen to have. Donating erases the tax bill, but the asset leaves your net worth with it.
An exchange fund is built for someone who wants to keep the full value of a large position, get it out of one stock, and skip the tax hit along the way. You'll still owe capital gains eventually, when you sell, but by then your capital has had years longer to grow inside a diversified fund first.
If the real reason you're searching for a way around capital gains tax is that your position is large enough that the tax bill itself is the roadblock, an exchange fund is usually the strategy worth examining most closely. It's the only one here purpose-built for that specific problem.
Glidepath's exchange fund works this way with no management fee, funded by revenue-generating assets as its qualifying illiquid asset instead of the real estate other providers rely on. Eligibility follows the accredited investor standard, individual income over $200,000, joint income over $300,000, or net worth over $1 million excluding your primary residence, with a $100,000 minimum contribution.
Ready to diversify your portfolio without the huge tax hit? Get started to see if you qualify.