If you are looking for a smart way to give to charity and reduce your tax bill, donating appreciated stock might be the answer. This strategy can deliver two major tax benefits: you avoid capital gains tax on the stock’s growth and claim a charitable deduction for the full market value.
What is Appreciated Stock?
Appreciated stock is any investment that has gone up in value since you purchased it. For example, if you bought shares for $5,000 and they are now worth $15,000, you have a $10,000 gain. Typically, selling those shares triggers capital gains tax. However, suppose you donate the shares directly to a qualified charity. In that case, you avoid paying capital gains entirely and deduct the full fair market value on your tax return, assuming you itemize and held the stock for more than a year.
Why Donating Appreciated Stock Can Be Better Than Giving Cash
- Avoid Capital Gains Tax: Selling appreciated stock means paying up to 20% in federal capital gains tax (plus 3.8% Net Investment Income for high earners). Donating the share eliminates this tax.
- Claim a Full-Value Charitable Donation: If you have held the stock for more than a year, you can deduct its full fair market value, not just what you paid for it.
- Give More to Charity: When you donate stock, the charity receives the full value. If you sold the stock first, taxes would reduce the amount available for donation.
- Rebalance Your Portfolio: Donating shares is a strategic way to reduce an oversized or high-risk stock position. You can diversify without triggering capital gains tax.
When Donating Appreciated Stock Makes Sense for Maximizing Tax Benefits
- Year-End Giving: You must complete your donation by December 31, 2025, to count toward your 2025 taxes. Stock transfers can take several days, so plan ahead.
- Significant Appreciation: When your stock has risen substantially in value, donating it instead of selling allows you to avoid capital gains tax that would otherwise be due. The more your stock has appreciated, the more powerful the tax benefit becomes.
- You Plan to Itemize: Taxpayers who itemize can “bunch” multiple years of charitable gifts into 2025 to maximize deductions before tax rules change.
- Before 2026 Tax Law Changes: The One Big Beautiful Bill Act, or OBBBA, brings significant limitations starting in 2026, including reducing the value of charitable donations. This makes 2025 an unusually favorable year for non-cash charitable giving strategies.
2025 Rules for Charitable Donations and Appreciated Stock
Under the laws in 2025:
- Cash gifts: deduct up to 60% of your adjusted gross income (AGI).
- Gifts of appreciated stock: deduct up to 30% of AGI for public charities (20% of private foundations).
- Carry forward unused deductions for up to five years.
These rules make appreciated stock gifts particularly powerful for high-income donors.
How 2026 Tax Law Changes Will Affect Charitable Stock Donations
Beginning in 2026:
- A New 0.5% AGI Floor: Only the portion of your charitable contributions above 0.5% of AGI is deductible. Smaller donations may not result in a deduction.
- Reduced Benefit for High Earners: High earners will have their charitable contributions capped at 35%, lowering the value of gifting appreciated assets.
- A Limited Non-Itemizer Deduction: A small above-the-line deduction does return, but it applies only to cash gifts, not to appreciated stock, and the deduction amount is expected to be modest.
The bottom line? 2025 is the last year to maximize charitable deductions before these restrictions reduce the tax advantage of donating stock.
Key Takeaways
- Donating appreciated stock gives you two tax breaks: no capital gains tax and a full-value deduction.
- Act before the 2026 changes reduce the benefits.
- Confirm the charity can accept stock gifts and keep IRS paperwork (Form 8283 for gifts over $500).
Ready to maximize your charitable giving and tax savings?
Working with wealth advisors can help you identify the best stock positions to donate, navigate AGI limits and carryforwards, coordinate timing before 2026 tax law changes, and integrate charitable giving into your long-term financial plan. Connect with us today to optimize your charitable giving strategy and trim your taxes.