Donating stock rather than a check

[Cooper]

Q. Has anyone ever donated stock to a tax-exempt charity/organization? If so, are all your capital gains tax exempt? 

I’m thinking of doing this and would like to know the benefits of doing so. Thanks. 

[+ ApexNomad]

20 minutes ago, Cooper said:

Q. Has anyone ever donated stock to a tax-exempt charity/organization? If so, are all your capital gains tax exempt? 

I’m thinking of doing this and would like to know the benefits of doing so. Thanks. 

If you donate long-term appreciated shares directly to a qualified charity, the built-in gain is never realized, so you don’t pay capital gains tax on it. If you sell first and then donate, you’d still owe the tax.

The only real downsides are the AGI limits (usually around 30% for appreciated stock), the holding period rules, and a bit more paperwork. Definitely worth talking to a CPA or financial advisor based on your specific situation.

[Kevin Slater]

Also, you only get to deduct the full appreciated value of the stock if you've held it a year or more, and you itemize rather than taking the standard deduction.

Kevin Slater

[Beancounter]

If you are currently at an age where you’re taking RMDs from your IRA you might want to consider a Qualified Charitable Distribution.  There is an upper limit to the amount you can give as a QCD ($108,000, I think) and the stock must be transferred directly from your IRA to the charity.  Using a QCD allows you to meet your RMD and is not taxable as income to you.  Make sure the organization is a registered charity and that it can accept stock as a contribution.  Many small non-profits and charities don’t have a brokerage account to accept stock transactions.   

[+ Vegas_Millennial]

2 hours ago, Cooper said:

Q. Has anyone ever donated stock to a tax-exempt charity/organization? If so, are all your capital gains tax exempt? 

I’m thinking of doing this and would like to know the benefits of doing so. Thanks. 

Yes, I have donated mutual funds directly to my church.  These were mutual funds I owned for several years.  I was able to deduct the full amount amount of my contribution (I itemized deductions), and never had to report capital gains.  The church had it set up so that I would transfer the funds directly to the church, and then the church would cash them out.

[jayjaycali]

There's a threshold potentially, you might need to cross 0.5% of your income before deductions kick in, I think new for 2026, depending on how you file.  Just in case good to check since, if applicable, donations below the floor don't have the same tax benefit.

Edited April 13 by jayjaycali

[Kevin Slater]

1 hour ago, jayjaycali said:

There's a threshold potentially, you might need to cross 0.5% of your income before deductions kick in, I think new for 2026, depending on how you file.  Just in case good to check since, if applicable, donations below the floor don't have the same tax benefit.

More precisely, whatever your donation, the first .5% of your AGI is non-deductible.

Kevin Slater

[Cooper]

My accountant sent this info to consider. 

The first major advantage is that you completely avoid paying capital gains tax because you are donating the stock itself rather than selling it, so the gain is never realized. A second benefit is that you still receive a charitable deduction based on the full fair market value of the stock, not what you originally paid, which creates a powerful double effect of avoiding tax while also reducing taxable income. A third advantage is that if you use a donor-advised fund, you can take the tax deduction in the current year while deciding which charities to support over time, giving you flexibility in how and when you give.

 

On the downside, the most important drawback is that once you donate the stock, the money is permanently gone and no longer part of your financial assets, which removes any future flexibility. Another issue is that you may be giving up a potentially better tax outcome for your heirs, since holding the stock until death would allow them to receive a step-up in basis and avoid capital gains tax anyway. The final drawback is that this strategy does not improve your cash flow at all, since it reduces taxes but does not generate any actual liquidity, which can be a problem if you still need access to cash for expenses or obligations.