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Charitable giving with cash versus appreciated stock
A gift of cash to a charity is deductible when itemizing, and a gift of stock held more than a year is deductible at its full market value with no tax on the gain.
Who this exists for. This exists for a person who gives to charity and holds investments that have grown in value. Ticks that show it: I give to charity; I hold investments outside retirement accounts; My household income is well above average.
How it works
Cash gifts to a qualified charity are deductible on the itemized schedule up to this year's official charitable cash agi limit percent (not yet verified here; see the official source below) percent of adjusted gross income, with the excess carried forward for five years. A gift of stock, fund shares, or other property held more than one year is deductible at fair market value on the date of the gift, up to this year's official charitable property agi limit percent (not yet verified here; see the official source below) percent of adjusted gross income, and the capital gain built into the shares is never taxed by anyone. Property held a year or less is deductible only at its cost. Gifts of property over a threshold require a written acknowledgment from the charity, and larger gifts of items other than publicly traded stock require an appraisal. The charity receives the shares and sells them without tax. A receipt is required for any single gift of $250 or more.
What it gives
Giving appreciated shares removes the gain from the giver's tax picture entirely.
The charity receives the full value, since it pays no tax on the sale.
Cash gifts have a higher percent of income cap than property gifts.
What it costs, or where the catch is
Both kinds of gift help only when itemizing beats the standard deduction, except for a limited deduction for non itemizers under conditions the IRS lists.
Shares held a year or less give up the market value deduction.
Many small charities cannot accept stock directly, which is where a donor advised fund comes in.
A worked example
Leif wants to give $10,000 to a food bank and holds shares he bought years ago for $4,000 that are now worth $10,000. Selling first would cost him 15 percent on the $6,000 gain, which is $900, leaving $9,100 to give. Giving the shares directly lets him deduct the full $10,000 while itemizing and skips the $900 of tax. The food bank sells the shares and keeps all $10,000.
Where it goes wrong
The common miss is selling the winning shares, paying the gain tax, and then writing a check for what is left.
Who confirms it for you
For your own numbers, a CPA or enrolled agent. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.
The official source
IRS Publication 526, Charitable Contributions. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.
Ask about Charitable giving with cash versus appreciated stock
A model reads this page and answers from it. It will say when the answer is not on the page. Education, not personalized advice.
Nearby doors
- After tax contributions and the mega backdoor Roth
This exists for a worker whose plan allows after tax contributions above the deferral cap and allows them to be moved into a Roth account.
- The employee stock purchase plan discount
This exists for a worker whose employer offers an employee stock purchase plan that sells company shares at a discount through payroll.
- Nonqualified deferred compensation
This exists for higher earners, usually executives and senior staff, whose employer offers a plan to defer salary or bonus beyond what a 401(k) allows.
- The backdoor Roth and the pro rata rule
This exists for a person whose income is above the Roth IRA phase out and who has no pretax money in any traditional IRA.
- I bonds and Treasury bills through TreasuryDirect
This exists for a person holding cash they do not need for a while, who wants to know what the Treasury sells directly to individuals.
- FDIC and NCUA insurance limits and ownership categories
This exists for anyone with money in a bank or credit union, and especially for a person whose balances at one institution are approaching the insured amount.
Education, not advice. Wealthy Habitat explains how rules work and never recommends what to do with your money. The No Advice Disclosure.