Tax Benefits of Donating Appreciated Stock

New tax rules make it more important than ever to understand the benefits and limitations of donating appreciated stock.

A well-timed stock donation can benefit both your chosen charity and your overall tax strategy. New Africa/Shutterstock

Donating appreciated stock that you’ve held for more than one year can greatly benefit the causes you care about and can also be a financially savvy move. Let’s take a closer look.

Avoiding Capital Gains Taxes

When you donate stocks that have grown in value directly to charity, you could bypass capital gains taxes.

Let’s say you purchased shares of a stock for $5,000. And two years later, those shares have grown to $12,000. If you sold those shares and donated the proceeds, you’d face a capital gains tax on the growth of $7,000.

But by donating these stocks directly to a qualified charitable 501(c)(3) organization, you avoid capital gains taxes. And the charity essentially benefits from the full value of your donation.

Itemized Charitable Deduction

If you donate appreciated stock that you’ve held for more than a year, you can deduct the fair market value of the stock from your taxable income, up to 30 percent of your adjusted gross income (AGI).

And you can carry over excess contributions up to five additional tax years.

Rebalancing

If stock appreciation in your portfolio caused it to steer away from its target asset allocation, you could donate appreciated stock to rebalance it, again while bypassing capital gains taxes.

New Rules

The One Big Beautiful Bill Act has introduced some major changes to the potential tax benefits of charitable giving, effective tax year 2026.

First, there’s a 0.5 percent AGI floor you must clear. This means that only the portion of your charitable contributions above 0.5 percent of your AGI would be deductible. So, some small donations may not result in a tax deduction.

Next, there’s a cap on the tax benefits of itemized charitable deductions for high earners in the 37 percent tax bracket, who now will be able to deduct 35 percent of their donation, but not 37 percent.

So for every $10,000 that someone in the 37 percent tax bracket donates, that individual will only save $3,500 in taxes (35 percent of $10,000).

Utilizing a DAF

Many people utilize a donor-advised fund (DAF) as part of their charitable giving plan.

A DAF is a financial account specifically designed for charitable giving. You can transfer appreciated stock to a DAF and get the same tax benefits as donating the stock directly to charity. But a DAF may offer more flexibility and additional benefits.

You can donate appreciated stocks to a DAF when it’s most financially beneficial to you and enjoy immediate tax breaks. But you will still have time to recommend that grants be made to organizations of your choice.

Many DAF providers also allow you to invest your donations into assets such as mutual funds. This could potentially allow your donations to grow tax-free and provide more benefits to your chosen charities.

Important Rules

Other than the new tax laws, there are some important rules you should remember in order to make the most out of your charitable giving strategy.

First, make sure that the recipient is a 501(c)(3) organization. Second, you need to itemize your taxes to benefit from a charitable deduction based on appreciated stock.

Plus, you’d benefit most if you donate appreciated stock that you’ve held for more than one year. This would allow you to deduct the full market value of the donation, up to applicable limits.

If you donate stocks that you’ve held for a year or less, the deduction is limited to its cost basis (what you initially paid for), up to 50 percent of your AGI.

Moreover, you should carefully document the donation. Make sure you have a record of the number of shares you donated and their fair market value on the date you made the donation. You may also need written acknowledgment from the charity as well as additional documentation for large donations, especially if they involve non-publicly traded stocks. So make sure you work with a qualified tax adviser when donating appreciated stock to charity.

The Bottom Line

Incorporating charitable giving into your financial plan can help you make the world a better place. And it can also provide you with key tax benefits. But considering new tax laws, it can help to work with a qualified tax adviser when developing your charitable giving strategy.

The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.