Updated for 2026. Donating appreciated stocks to charity can be a great way to maximize your tax benefits and charitable goals. When you donate cash or write a check, you give after-tax dollars. It may still reduce your income tax liability, but if not, there’s no financial benefit. However, when you gift an appreciated stock, you avoid realizing a capital gain and receive a tax deduction for the donation if you itemize. In the right situations, donating stock to charity can have lasting tax benefits – aside from the intangible value of furthering a cause that’s important to you.
How to donate stock to charity with a donor-advised fund
A donor-advised fund is perhaps the most streamlined way to donate appreciated securities. Donor-advised funds can be set up easily at some of the major institutions (e.g. Schwab, Fidelity) or with the help of your financial advisor. When you make an irrevocable donation to your donor-advised fund, you have the potential to receive a tax deduction for the market value of the asset at the time it is gifted.
Unless the deduction is capped (more on that later) the taxpayer will have their current year’s taxes reduced as an itemized deduction. Another key benefit: avoiding capital gains taxes on the appreciation, had the stock been sold to give away the net proceeds.
When a stock is donated to a donor-advised fund, it’s sold. Your new charitable giving account receives cash which you can reinvest or leave in cash. Cash can also be contributed to a donor-advised fund, which is a common use for a portion of the proceeds from the sale of a privately-held business. Donors can generally control the timing and charitable recipient of funds, if it’s an IRS-qualified public charity.
To recap: donating stock to charity with a donor-advised fund (DAF) is a two-step process. Funding your DAF is step one, and this determines the amount that qualifies for a tax deduction. The second step is distributing the gift from your donor-advised fund to the charitable organizations. These two steps often don’t happen in the same year.
Are stock donations tax deductible? New rules on deducting charitable donations
If you itemize your tax deductions, the maximum charitable deduction allowable for donations of long-term securities is the fair market value of the asset, up to 30% of adjusted gross income, or AGI. New tax rules for 2026 and beyond complicate the math, though.
Calculating charitable deduction tax benefits: the .5% floor
Starting in 2026, all taxpayers can benefit from gifts to charity in the form of an above-the-line deduction up to $1,000 ($2,000 married filing jointly) without needing to itemize. However, taxpayers who itemize now face a new floor of .5% of adjusted gross income (AGI) before their charitable deduction is calculated. For example, a taxpayer with an adjusted gross income of $500,000 would only be able to deduct donations in excess of $2,500.
If your total charitable contributions for a given year exceed the AGI limits, like the 30% AGI limit on appreciated long-term securities going to public charities, the excess (including the amount disallowed by the new 0.5% floor) can be carried forward for up to five years. Note that if your gift doesn’t exceed the AGI limit, there is no way to recoup the .5% lost from this new floor. Adding to the complexity, there are new ordering rules when calculating the floor.
Calculating charitable deduction tax benefits: 35% cap on itemized deductions for high-income taxpayers
Starting in 2026, taxpayers in the top 37% bracket face new limits on itemized deductions. In 2026, that includes individuals with taxable income above $640,600 (single) or $768,700 (joint). The new limitation reduces allowable itemized deductions by 2/37 (or 5.41%) of the lesser of: 1. total itemized deductions or 2. the taxpayer’s taxable income in the 37% bracket. In effect, this caps the tax benefit on the deduction at 35% of every dollar, rather than the full 37%.
Example:
A married couple has adjusted gross income (AGI) of $1M and make a $100,000 donation of appreciated stock to their donor-advised giving fund. Assume no other itemized deductions. Note that their charitable gift would first be reduced by the .5% AGI floor, which reduces their allowable gift by $5,000. Their itemized charitable deduction will be further reduced by the lesser of:
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- Net remaining charitable deduction of $95,000 multiplied by 5.41% = $5,135
- Taxable income in the 37% bracket threshold multiplied by 5.41% = $12,503
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So in this simple hypothetical example, a charitable gift of long-term appreciated assets worth $100,000 in fair market value would roughly translate to an itemized deduction of $90,000. Before making a donation, consider speaking with your tax advisor about your situation and other strategies, such as bunching, to maximize the tax benefits of giving.
Don’t be scared by the math! It’s probably worth doing
Using the example above, consider if the couple sold the stock and donated the proceeds instead. At a high level, without getting too deep into the math:
- Assume no cost basis on the stock worth $100,000. If the couple sells the stock instead, at the 20% long-term capital gains tax rate, they would owe $20,000 in capital gains tax, excluding other taxes and state tax
- The couple’s AGI would go up from incurring the gain, which can create other knock-on effects
- The net cash proceeds would be roughly $80,000 after long-term capital gains taxes alone. This could be deducted as an itemized cash gift to charity, pending further reduction from the two floors discussed above
- The net result is that the taxpayer would get less of a tax benefit and the charity would receive a smaller gift
The tax benefits really depend on how much the asset has appreciated relative to your cost basis. Without meaningful capital gains savings, you may be better off with cash donations in some situations. For positions with losses, it’s usually better to sell the stock, realizing the loss (hopefully to offset other gains), then donate cash. Publicly traded and non-publicly traded assets qualify, though the latter requires an independent valuation. This increases the cost of giving.
Before moving forward, speak with a charitable giving advisor, your tax advisor, and financial advisor.
Who should give stock to charity?
You can give a wide range of assets using a donor-advised fund. This includes publicly traded stocks, bonds, and mutual funds, to real estate and shares in a closely-held business. For individuals with a significant amount of stock options or equity-based compensation from their employer, a donor-advised fund may be a great opportunity to accomplish charitable goals.
Typically, shares from vested restricted stock units or awards, or shares from an exercise of non-qualified stock options (NSOs) held for over one year provide the greatest tax benefits when donated to charity over other forms of equity compensation.
Individuals experiencing sudden liquidity should also consider donating stock if they’re charitably inclined. A large taxable windfall can create a lot of headaches. For example, after selling a business or having stock options cashed out after a merger or buyout, you may have few ways to reduce your tax bill.
For example, suppose you’re in the 37% tax bracket and expect to be in a 24% bracket in future years. Using rough math, making a large gift in the current year could save 13% on every dollar donated. And that’s assuming you benefit from itemizing in future years, which you may not.
Other ancillary tax benefits include possibly avoiding the 3.8% Medicare surtax, loss of other tax deductions/credits, or facing higher Medicare Part B and D premiums.
A donor-advised fund isn’t the only way to give back, though. Consider these other tax-saving gifting methods.
[Last reviewed January 2026]
