Gifting Appreciated Stock: A Smart Way to Support Causes You Care About

8 July 2025

Have you ever wanted to make a bigger impact with your charitable giving without emptying your wallet? If you own stocks that have significantly increased in value, donating them instead of cash might be one of the smartest financial moves you can make. Not only will this strategy support the causes close to your heart, but it can also provide you with some sweet tax benefits.

But how does gifting appreciated stock work, and why is it such a smart way to give? Let's break it down in simple terms.

What Is Appreciated Stock?

Before we dive into the benefits of donating appreciated stock, let's clarify what "appreciated stock" actually means.

Appreciated stock refers to shares of a company that have increased in value since you first purchased them. For example, if you bought shares of a company for $50 each, and they’re now worth $150, those shares have appreciated by $100 each.

Normally, when you sell these stocks, you owe capital gains tax on the profit. However, by choosing to gift them to charity instead, you can avoid that tax while making a meaningful contribution.

Why Consider Gifting Appreciated Stock?

Now, why should you consider gifting appreciated stock instead of just writing a check? There are three key reasons:

1. You Avoid Capital Gains Taxes

When you sell an appreciated stock, the IRS expects you to pay capital gains tax on the profit. If you’ve held the stock for over a year, you’ll owe long-term capital gains tax, which can be as high as 20%, depending on your income.

By gifting the stock directly to a charity, you completely sidestep that tax hit and ensure 100% of the stock’s value is used for a good cause.

2. You Can Take a Bigger Tax Deduction

Not only do you skip the capital gains tax, but you can also claim a tax deduction for the full fair market value of the stock at the time of the donation.

Let’s put this into perspective:

- If you donate $10,000 in cash, you get a $10,000 tax deduction.
- If you donate $10,000 worth of appreciated stock that you originally bought for $4,000, you still get a $10,000 tax deduction—but without paying tax on the $6,000 gain!

This double benefit makes stock donations one of the most tax-efficient ways to give.

3. The Charity Gets More Money

Because charities don’t have to pay capital gains tax, they receive the full value of your donated stock when they sell it.

If you were to sell the stock first and donate the after-tax cash, the charity would end up with less money. By gifting the stock directly, you maximize the impact of your donation!

How to Donate Appreciated Stock

Gifting appreciated stock to charity is easier than you might think. Here’s a simple step-by-step process to follow:

Step 1: Choose the Right Charity

Not all organizations accept stock donations, so the first step is to contact the charity and confirm that they have a brokerage account set up to receive such gifts.

Step 2: Speak With Your Broker or Financial Advisor

Once you’ve confirmed that your charity can accept stock donations, let your broker or financial advisor know. They will help you transfer the shares directly to the charity’s brokerage account.

Step 3: Get a Receipt

After the transfer is complete, make sure to request an acknowledgment or receipt from the charity. This document is essential for claiming your tax deduction come tax season.

Step 4: Report Your Donation on Your Tax Return

When filing your taxes, be sure to include details of your donation. If the value exceeds $5,000, you may also need to file IRS Form 8283.

Who Should Consider Donating Appreciated Stock?

While this strategy is beneficial for many investors, it’s particularly appealing if you:

✅ Have stocks that have grown significantly in value and have been held for more than one year.
✅ Want to support a charity while reducing your tax bill.
✅ Are looking for a more efficient alternative to cash donations.
✅ Wish to rebalance your portfolio without getting hit with a large tax liability.

Even if you don’t currently own appreciated stock, this is a fantastic strategy to keep in mind for future investments!

Things to Keep in Mind Before Donating

While gifting appreciated stock is a fantastic strategy, here are a few things you should be aware of before making the move:

1. You Must Donate Long-Term Holdings

For tax benefits, the stock must have been held for at least one year. If you donate shares owned for less than a year, your deduction is equal to what you originally paid for them—not their appreciated value.

2. There Are Deduction Limits

The IRS limits how much stock donations you can deduct in a single year—typically up to 30% of your adjusted gross income (AGI). If your donation exceeds this, you can carry forward the unused portion for up to five years.

3. Not All Charities Accept Stock

Some smaller charities may not have the setup to accept stock gifts, so it’s always best to check with them first.

4. Timing Matters

To qualify for a deduction in the current tax year, your stock transfer must be completed by December 31st. If you wait too long, your tax benefits could be delayed until the following year.

What If You Still Want the Cash?

If you love the idea of donating appreciated stock but also need some cash for yourself, there’s a clever workaround:

The Donate-and-Rebuy Strategy

1. Donate your appreciated stock to charity.
2. Immediately buy the same stock again with the cash you were planning to donate.

This strategy helps you in two key ways:

✔ You still make your charitable contribution.
✔ You reset your stock’s cost basis to its current market value, essentially reducing your future capital gains tax liability.

It’s a win-win!

Final Thoughts

Gifting appreciated stock isn’t just a generous way to support the causes you care about—it’s also a smart financial decision. By donating stocks instead of selling them, you can avoid capital gains taxes, maximize your tax deductions, and give more to charity without spending extra money.

If you’re an investor with highly appreciated stocks, this strategy is worth considering the next time you feel like giving back. It’s a simple, tax-savvy way to turn your investments into meaningful contributions!

So, why not make your donations work harder for both you and the charity? Your appreciated stocks could be the financial gift that keeps on giving.