Gifting Appreciated Stock: Why Donating Shares Beats Donating Cash
Every December, millions of donors hand charities less money than they intend to, and a single overlooked step in how they give is the reason. The IRS actually offers two separate tax breaks for one gift, but only if you…
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Consider a retired couple who give to their church every December. They also own a stock fund bought decades ago that is now worth far more than they paid for it. To make the gift, they sell some shares, wait for the cash to settle and write a check.
Selling first costs them money. The sale turns a paper profit into a taxable capital gain, so the IRS takes its share before the charity gets anything. If they hand the shares straight to the charity, they can skip that tax. If they itemize, they can still deduct the full market value of the shares.
Donating Shares Directly Gets You Two Tax Breaks
An unrealized gain is the profit inside an investment you haven’t sold yet. Fair market value is the price the shares would sell for on the open market on the day you give them.
When you give long-term appreciated stock to a qualified public charity, you get two benefits. First, you never sell the shares, so you never owe capital gains tax on the growth. The charity is tax-exempt, so it can sell them without owing tax either. Second, the deduction is generally based on fair market value, which includes growth you were never taxed on. Under 26 U.S.C. § 170(e)(1)(A), a property deduction is reduced only by gain that would not have been long-term gain if you had sold.
Compare the cash route. You sell, report the gain, pay the tax and give away what’s left, or you cover the tax from other savings. Your deduction equals the cash you gave. Either way the charity gets the same gift, but you pay a tax bill you didn’t have to.
This matters most for the households that own most of the stock. According to the Federal Reserve, the top 1% held 50.9% of corporate equities and mutual fund shares outside workplace retirement plans in the second quarter of 2026. The next 9% held 37.2%.
Rules That Decide Whether Your Stock Gift Qualifies
Hold the shares more than a year. Long-term treatment requires a holding period longer than 1 year, and the count starts the day after you bought the shares. If you give shares held a year or less, the deduction is cut by the short-term gain. That usually leaves you deducting only what you paid.
Stay under the income caps. Adjusted gross income (AGI) is your income after certain adjustments but before deductions. IRS Publication 526 for 2025 returns caps gifts of capital gain property to public charities at a limit based on 30% of AGI.
Carry the rest forward. A carryforward lets you use a deduction you couldn’t claim in full in later years. The IRS says you may deduct the excess in each of the next 5 years until it is used up.
You must itemize. Itemizing means listing your deductions one by one on Schedule A instead of taking the flat standard deduction. For tax year 2026, the standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. Your itemized deductions need to add up to more than that before the stock deduction does you any good.
How to Give Shares Without Accidentally Selling Them
Ask the charity for its brokerage account details. Then tell your broker to transfer the shares “in kind,” meaning the shares themselves move instead of the cash from selling them. If you sell first, you lose the benefit. Give the lots with the biggest gains, and get a written acknowledgment from the charity.
A donor-advised fund gives you more flexibility. It’s a charitable account at a sponsoring organization, often a brokerage’s charity arm. You put shares in now, take the deduction in the year you contribute if you itemize, and recommend grants to specific charities later. Donors who pack several years of giving into one contribution may be able to itemize in that year and take the standard deduction in the others. (Appreciated shares, DAFs and QCDs are the three moves we walked through in a free guide to tax-smart charitable giving.)
When Cash, a Loss Sale or an IRA Gift Works Better
Stock that has lost value. Sell it, claim the capital loss and donate the cash. Capital losses can offset up to $3,000 of other income a year, and you carry any unused amount forward. If you donate the shares instead, the loss disappears.
Retirees who take the standard deduction. Giving stock still avoids capital gains tax, but you get no deduction for it. Under 26 U.S.C. § 170(p), people who don’t itemize can deduct up to $1,000 ($2,000 on a joint return). That deduction covers cash gifts to public charities only. Gifts to donor-advised funds don’t count.
Retirees old enough for QCDs. A qualified charitable distribution (QCD) is money your IRA trustee sends directly to a charity. It stays out of your taxable income, and you must be at least age 70½. The annual maximum for 2025 was $108,000, and a QCD will count towards your required minimum distribution. Because it lowers AGI whether or not you itemize, it can beat both cash and stock for many retirees.
Before you write the next check, look at which account you’re giving from. Long-held winners usually make the best gifts. Losing positions are usually better sold, with the cash donated. Once you reach QCD age, the IRA may be the best source of all. It’s worth running the numbers with a CPA or fiduciary tax advisor before you move large positions.
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Vilma Rios is a tax professional and tax content contributor with more than 15 years of experience in tax and accounting. She specializes in federal tax research, tax education, and translating complex tax rules into clear, practical information for individuals, families, and small-business owners.
Vilma is a Content Tax Contributor II with the National Association of Tax Professionals (NATP), where she contributes to tax education and professional content. She has also presented tax information through webinars, including Spanish-language tax education, and has appeared on Telemundo 47 discussing tax topics and helping viewers understand important tax-filing requirements.
Her experience also includes tax and accounting work, tax research, IRS-related matters, and public tax education. While in college, Vilma volunteered in an IRS-sponsored tax assistance program and was recognized for her community service by local and state officials.
Known as “Your Tax Geek,” Vilma is passionate about making taxes easier to understand and helping people navigate an increasingly complex tax system.
