Gifting appreciated stock to charity lets a donor skip the capital gains tax on the stock’s growth and, when the shares have been held longer than one year, deduct the full fair market value, so more money can reach the charity than selling the shares first and donating the after-tax cash (Source: IRS Publication 526, 2025).
For 2026, a donor who itemizes can generally deduct long-term appreciated stock at fair market value up to 30% of adjusted gross income (AGI), versus 60% for cash, while avoiding capital gains tax of up to 23.8% on the appreciation. Beginning in tax year 2026, a new 0.5%-of-AGI floor reduces the deductible amount (Source: IRS Publication 526, 2025; CRS Report R48789, 2025).
Why gifting appreciated stock to charity is often more tax-efficient than donating cash
Donating long-term appreciated stock instead of cash can produce two separate tax results at once: the donor generally avoids the capital gains tax that a sale would trigger, and, if itemizing, can deduct the stock’s full fair market value as a charitable contribution (Source: IRS Publication 526, 2025). This is often described as a double tax benefit, and it is the reason the strategy exists.
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Long-term capital gains on stock are taxed at 15% or 20% depending on income, and higher earners may owe an added 3.8% Net Investment Income Tax, for a top combined federal rate of 23.8% (Source: IRS Topic No. 409, Capital Gains and Losses; IRC section 1411, Net Investment Income Tax). Every dollar of that tax a sale would have created is a dollar the charity does not lose when the shares are given directly.
The one-year rule: long-term versus short-term shares
To deduct the full fair market value, the stock generally must be long-term property, meaning it was held more than one year (Source: IRS Publication 526, 2025). Shares held one year or less are short-term property, and the deduction for them is limited to the lower of cost basis or fair market value, which removes most of the advantage of giving appreciated shares. Among long-term holdings, lower-basis lots carry the largest embedded gain.
How much can you deduct? The 2026 AGI limits
Charitable deductions are capped as a percentage of AGI, and the cap depends on what is given and to whom. Long-term appreciated stock deducted at fair market value to a public charity is generally subject to a 30% of AGI limit, versus 60% for cash to the same type of charity, and 20% for gifts of such stock to a private non-operating foundation (Source: IRS Publication 526, 2025).
| Gift type / recipient | AGI deduction limit (2026) |
|---|---|
| Cash to a public charity or donor-advised fund | 60% of AGI |
| Long-term appreciated stock at fair market value to a public charity or donor-advised fund | 30% of AGI |
| Long-term appreciated stock to a private non-operating (family) foundation | 20% of AGI |
Amounts above the applicable ceiling are not lost; a donor may generally carry the excess forward and deduct it over the next five years until it is used up (Source: IRS Publication 526, 2025). A special election under section 170(b)(1)(C)(iii) lets a donor apply a 50% of AGI limit to appreciated stock, but it requires reducing the deduction to cost basis rather than fair market value, so it rarely helps a highly appreciated position (Source: IRS Publication 526, 2025).
Because charitable deductions reduce taxable income in the year taken, a large stock gift can offset income created by a Roth conversion in the same year. The conversion itself raises AGI, which raises these dollar ceilings, and any deduction above the ceiling carries forward five years (Source: IRS Publication 526, 2025; IRS Publication 590-A). This is general information, not a recommendation.
A worked before-versus-after example
The clearest way to see the benefit is a side-by-side comparison. Assume a donor holds stock worth $100,000 with a $20,000 cost basis, held more than one year, so the embedded long-term gain is $80,000, and assume a 23.8% combined long-term rate (Source: IRS Topic No. 409, Capital Gains and Losses; IRC section 1411). The figures below are illustrative; individual results depend on income and state taxes.
| Step | Sell first, donate cash | Donate the shares in kind |
|---|---|---|
| Value of stock | $100,000 | $100,000 |
| Capital gains tax at 23.8% on $80,000 gain | $19,040 | $0 |
| Amount the charity receives | $80,960 | $100,000 |
| Charitable deduction (fair market value) | $80,960 | $100,000 |
Donating in kind sends an extra $19,040 to the charity and gives the donor a deduction $19,040 larger, because no tax erodes the gift before it arrives (Source: IRS Publication 526, 2025). The charity, as a tax-exempt organization, owes no capital gains tax when it later sells the shares.
How the 2026 OBBBA rules change the math for top-bracket donors
Two changes from the One Big Beautiful Bill Act (P.L. 119-21) take effect in tax year 2026 and reshape the deduction for larger donors. Itemizers may deduct only charitable gifts above 0.5% of AGI, so the first 0.5% of AGI in giving yields no deduction, and taxpayers in the top 37% bracket have the value of itemized deductions capped at a 35% rate (Source: CRS Report R48789, 2025; IRS 2026 inflation adjustments release).
The 37% bracket in 2026 begins at income over $640,600 for single filers and $768,700 for married couples filing jointly (Source: IRS 2026 inflation adjustments release). The example below applies both new rules to a married couple with $1,000,000 of AGI giving the same $100,000 of appreciated stock.
| Item | Amount |
|---|---|
| Stock gift (fair market value) | $100,000 |
| Less 0.5%-of-AGI floor (0.5% of $1,000,000) | $5,000 |
| Deductible amount after the floor | $95,000 |
| Deduction value if capped at 35% (top-bracket rule) | up to $33,250 |
| Deduction value at 37% with no floor (pre-2026 basis) | up to $37,000 |
For this donor the two provisions trim roughly $3,750 of federal tax benefit on a $100,000 gift, though the capital gains avoided on the appreciation is unchanged (Source: CRS Report R48789, 2025). A separate permanent above-the-line deduction for non-itemizers, up to $1,000 single and $2,000 married filing jointly beginning 2026, is cash-only and does not cover gifts of stock (Source: CRS Report R48789, 2025).
The rebuy move: resetting cost basis
A donor who wants to keep the position can donate the low-basis shares and immediately repurchase the same stock with cash. The repurchase establishes a new, higher cost basis equal to what was paid, which reduces future taxable gain, and the wash-sale rule does not apply because that rule disallows losses, not gains (Source: IRS Publication 550, 2025).
Using the earlier figures, giving $100,000 of stock with a $20,000 basis and then rebuying $100,000 of the same shares replaces an $80,000 embedded gain with a fresh $100,000 basis, so the charity receives the full value, the donor keeps the exposure, and a later sale is measured from the higher basis.
Donor-advised fund or direct gift: two paths
Appreciated stock can be given straight to a single charity or routed through a donor-advised fund (DAF), a giving account sponsored by organizations such as Fidelity Charitable, Vanguard Charitable, and DAFgiving360 (formerly Schwab Charitable). A DAF accepts the shares, sells them tax-free, and lets the donor recommend grants to charities over time; the deduction is taken in the year the stock enters the fund (Source: IRS Publication 526, 2025).
A DAF is one common vehicle, not a requirement. A donor can transfer shares directly to any qualified 501(c)(3) that can receive securities, which avoids sponsor fees and account minimums but requires the charity to have a brokerage account. Whichever path is used, the gift must go to a qualified organization; tax-exempt status can be confirmed through the IRS Tax Exempt Organization Search (Source: IRS, Tax Exempt Organization Search).
RSUs, ESPP, and restricted or control stock
The strategy applies to publicly traded stocks, bonds, and mutual fund shares, but employer equity carries extra rules. Restricted stock units and employee stock purchase plan shares can be gifted once vested or purchased and the holding period is met, while restricted or control stock held by insiders may face SEC Rule 144 resale limits (Source: IRS Publication 526, 2025; SEC Rule 144). Concentrated plan stock may instead suit a net unrealized appreciation analysis.
How to transfer stock to charity, step by step
The mechanics are straightforward but time-sensitive, and transferring the shares in kind rather than selling them first is what preserves the capital gains advantage. Because a gift counts only when the shares reach the charity, timing matters near year-end. A typical process, drawn from IRS guidance, runs through the following steps (Source: IRS Publications 526 and 561, 2025):
- A specific long-term lot is identified and confirmed to have been held more than one year.
- The recipient is verified as a qualified 501(c)(3) through the IRS Tax Exempt Organization Search, and its brokerage account and delivery (DTC) instructions are obtained.
- The donor’s broker receives a signed letter of instruction or transfer form identifying the security, share count, and receiving account.
- The charity is given the transfer details so it can match and acknowledge the incoming shares.
- The charity provides a written acknowledgment describing the stock and stating whether any goods or services were received; a single gift of $250 or more requires this acknowledgment (Source: IRS Publication 526, 2025).
- IRS Form 8283 is filed with the return for noncash gifts totaling more than $500; publicly traded stock generally does not require a qualified appraisal (Source: IRS Form 8283 instructions, Rev. December 2025).
The deduction equals fair market value on the contribution date, defined for publicly traded shares as the average of the highest and lowest quoted selling prices that day; if there were no sales that day, the average of the nearest trading dates before and after is used (Source: IRS Publication 561, 2025).
Common mistakes to avoid
Most failed stock gifts trace to a handful of avoidable errors around basis, timing, and the wrong asset. The list below covers the ones that most often reduce or void the intended benefit (Source: IRS Publications 526 and 561, 2025).
- Unknown or missing cost basis. For a gift at fair market value, basis does not change the deduction, so a missing basis need not block the gift; basis still matters for the capital gains the donor avoids and for any shares kept or repurchased.
- Valuation date errors. Value is the mean of the day’s high and low on the transfer date, not the prior close or the year-end price (Source: IRS Publication 561, 2025).
- Year-end transfers that do not settle. A gift counts in the year the shares leave the donor’s control and reach the charity or DAF; stock initiated in late December may not settle by December 31, pushing the deduction into the next year.
- Gifting depreciated stock. When shares are worth less than their cost, giving them in kind wastes the loss. Selling first can harvest the capital loss, and the cash proceeds can then be donated (Source: IRS Publication 526, 2025).
Giving appreciated stock differs from giving cash from an IRA, covered in our guide to qualified charitable distributions, which uses a different asset and different rules; the two can serve separate roles in a giving plan.
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Frequently asked questions
These answers address the questions donors most often raise about giving appreciated stock: why it can be more tax-efficient than cash, the adjusted gross income limits that apply, how the holding period affects the deduction, and the paperwork involved. Each answer reflects federal rules for the 2026 tax year and is general information rather than advice for any specific situation (Source: IRS Publication 526, 2025).
Why would I donate stock instead of cash?
Donating long-term appreciated stock can avoid the capital gains tax a sale would trigger, up to 23.8% federally, while still allowing a fair market value deduction if you itemize (Source: IRS Publication 526, 2025). The charity receives the full value and, being tax-exempt, owes no gain on the shares, so more money reaches the cause than donating after-tax cash.
What is the AGI limit for donating stocks?
Long-term appreciated stock deducted at fair market value to a public charity or donor-advised fund is generally limited to 30% of adjusted gross income, versus 60% for cash and 20% for gifts to a private non-operating foundation (Source: IRS Publication 526, 2025). Amounts above the limit can generally be carried forward and deducted over the next five years.
Can I donate stock with unknown basis?
Yes. When you deduct long-term appreciated stock at fair market value, the deduction does not depend on cost basis, so a missing basis need not stop the gift (Source: IRS Publication 526, 2025). Basis still matters for calculating the capital gains tax you avoid and for any shares you keep or repurchase, so it is worth reconstructing when possible.
How do I avoid capital gains tax by donating stock?
Transfer the shares to the charity in kind rather than selling them first. Because you never realize the gain, no capital gains tax applies, and the charity can sell tax-free as a 501(c)(3) organization (Source: IRS Publication 526, 2025). Selling before donating instead triggers the tax and reduces the amount available to give.
Do I need to have held the stock for more than a year?
To deduct full fair market value, yes. Stock held more than one year is long-term property and qualifies for the fair market value deduction; shares held one year or less are limited to the lower of cost basis or fair market value, which removes most of the benefit (Source: IRS Publication 526, 2025).
What IRS form do I need to donate stock to charity?
Noncash gifts over $500 require IRS Form 8283 filed with your return, and any single gift of $250 or more needs a written acknowledgment from the charity (Source: IRS Publication 526, 2025; Form 8283 instructions, 2025). Publicly traded stock generally does not require a qualified appraisal, unlike many other noncash gifts.
How does donating stock to a donor-advised fund work?
You transfer appreciated shares to a donor-advised fund sponsor such as Fidelity Charitable, Vanguard Charitable, or DAFgiving360. The fund sells the stock tax-free, and you take the deduction in the transfer year, then recommend grants to charities over time (Source: IRS Publication 526, 2025). The 30%-of-AGI limit for appreciated stock applies to gifts into the fund.
Is it better to donate stock or sell and donate cash?
For long-term appreciated shares, donating in kind is generally more efficient because it avoids capital gains tax and preserves the fair market value deduction (Source: IRS Publication 526, 2025). The exception is depreciated stock: selling first can harvest a deductible capital loss, after which the cash proceeds can be donated. Circumstances vary, so specifics matter.
Sources
IRS Publication 526, Charitable Contributions (2025): https://www.irs.gov/publications/p526
IRS Publication 561, Determining the Value of Donated Property (Rev. Dec. 2025): https://www.irs.gov/publications/p561
IRS Publication 550, Investment Income and Expenses (2025): https://www.irs.gov/publications/p550
IRS Topic No. 409, Capital Gains and Losses: https://www.irs.gov/taxtopics/tc409
IRS, About Form 8283, Noncash Charitable Contributions (Rev. December 2025): https://www.irs.gov/forms-pubs/about-form-8283
IRS, One Big Beautiful Bill provisions: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions
IRS, Tax inflation adjustments for tax year 2026: https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
Congressional Research Service Report R48789, Tax Issues Relating to Charitable Contributions and Organizations (2025): https://www.everycrsreport.com/reports/R48789.html
IRS, Tax Exempt Organization Search: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search
