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Take a $100,000 stock position bought years ago for $60,000. Three things can happen to the $40,000 gain, and they are taxed at three different rates: 35%, 0%, and less than 0%.
Sell it
$14,040 of tax
- 35.1% on the $40,000 gain at top California rates.
- The $85,960 left over is what you actually get to reinvest or spend.
- Every harvesting program eventually arrives here unless something below happens first.
Leave it in the estate
$0 of tax
- At death the cost basis resets to market value. The $40,000 gain is never taxed by anyone.
- California follows the federal rule.
- The 2026 estate exemption is $15,000,000 per person, so estate tax does not enter for most households.
Give it to charity
About $35,000 of tax back
- Deduct the full $100,000 market value, worth about $35,000 of tax at the top bracket. No gain is recognized.
- Up to 30% of income per year, with a five-year carryforward for the rest.
- The charity sells it tax-free.
Nothing on the rest of this site is worth as much per dollar as the second and third columns. They are also the least advertised, because there is no product to sell.
Why this one ranks first
Every other lever reduces or defers the tax on a gain. This one removes it. Holding to the step-up turns a 35-cent tax into a zero. A proposal to move a low-basis winner into a different strategy or manager has to sell it first, and that sale pays the 35 cents the estate route never pays.
Harvested losses and this lever fit together. A harvest sells a loser and buys a replacement with a lower cost basis, so the tax it saved is deferred into that replacement, not forgiven; giving the replacement shares away once they have appreciated is the one exit that turns the deferral into permanent forgiveness.
Two 2026 rules that change the timing of gifts
The 2025 tax act added a floor and a haircut.
- The floor. The first 0.5% of income given to charity earns no deduction at all. At $900,000 of income that is the first $4,500 each year.
- The haircut. Itemized deductions for income in the 37% bracket are cut by 2/37, which takes a deduction from 37 cents on the dollar to 35.
Both favor bunching. Put several years of giving into one contribution of the lowest-basis shares to a donor-advised fund, take one large deduction that clears the floor once, and grant to charities from the fund over the following years.
Estate tax and lifetime gifts are a different decision
Estate tax above the exemption, gifts during life to people rather than charities (the recipient keeps your basis), and the question of whether a concentrated position should be diversified for risk reasons regardless of tax. Those are different decisions. This one is only about the tax on a gain, and the answer to “when is the tax on a gain zero” is: when the gain is never realized by you.