Is Donating Stock to Charity the Right Move?
Note: This article was updated in 2026 to reflect changes introduced by the One Big Beautiful Bill Act (OBBBA). Tax figures reflect the 2026 tax year and are subject to change. Please consult a qualified tax advisor regarding your specific situation.
If you’re already giving to causes you care about — and doing it from a portfolio with appreciated stock — you’re ahead of most people. Donating shares directly to a qualified charity can eliminate the capital gains tax you’d owe on a sale and give you a tax deduction based on the stock’s full fair market value.
That much hasn’t changed. But the rules around the deduction itself shifted in 2026, and some of them are worth understanding before your next gift.
How Donating Stock Works
The mechanics are straightforward. You transfer shares of appreciated stock — held for more than one year — directly to a charity or a giving vehicle like American Endowment Foundation. Two things happen:
You avoid capital gains tax on the appreciation. If you’re in the top bracket with exposure to the Net Investment Income Tax (NIIT), that could mean avoiding up to 23.8% in federal taxes on the gain — because the charity, as a tax-exempt organization, pays no capital gains tax when they sell the shares either.
You receive a charitable deduction based on the stock’s fair market value on the date of transfer — not your original cost basis. Technically, the deduction is calculated as the average of the stock’s highest and lowest trading prices that day.
The net effect: compared to selling the stock, paying the tax, and donating the cash, donating the shares directly means more money reaches the charity and more of the tax benefit stays with you.
What Changed in 2026
The One Big Beautiful Bill Act introduced three changes to charitable deductions that affect how stock donations are treated for tax purposes.
A new floor on deductions. Starting in 2026, only charitable contributions exceeding 0.5% of your adjusted gross income (AGI) are deductible. If your AGI is $1 million, the first $5,000 of charitable giving generates no deduction. For donors whose annual giving is modest relative to income, this floor can meaningfully reduce the tax benefit.
A cap on the deduction rate for top-bracket taxpayers. If you’re in the 37% federal tax bracket, the tax benefit of your itemized deductions — including charitable deductions — is now limited to 35 cents per dollar rather than 37 cents.¹
A new deduction for non-itemizers. Taxpayers who take the standard deduction can now deduct up to $1,000 (single) or $2,000 (married filing jointly) in cash donations to qualified operating charities. This applies to cash only, not stock, and does not cover contributions to DAFs or private foundations.
The AGI deduction caps for stock donations remain unchanged: up to 30% of AGI for gifts to public charities and private operating foundations, and up to 20% for private non-operating foundations. Unused deductions can still be carried forward for up to five years. For the full IRS breakdown of deduction limits and qualified organizations, see Publication 526.
Want more on how the giving landscape is shifting? Off the Wall recently covered three trends reshaping charitable giving this year. Watch the episode.
Which Stocks Make the Best Donations
Not all shares are equal when it comes to charitable giving. The strongest candidates share a few characteristics.
Long-term holdings with large unrealized gains. Securities held for more than one year qualify for a deduction at full fair market value. The larger the gap between your cost basis and the current price, the greater the tax benefit of donating rather than selling. If you’re choosing between multiple positions, the one with the biggest embedded gain typically offers the most efficient charitable dollar.
Overweighted positions you’d rebalance anyway. If your portfolio has drifted and you’re planning to reduce a position to realign with your target allocation, donating those shares accomplishes two things at once — it rebalances the portfolio and generates a deduction without triggering a taxable event.
Concentrated employer stock. If you hold a significant position from stock compensation — RSUs, ISOs, or ESPP shares — donating a portion can reduce concentration risk while supporting your charitable goals. This is especially relevant when the position represents a meaningful percentage of your net worth.
What to avoid donating: Stocks held for less than one year (your deduction is limited to cost basis, not fair market value), stocks trading below your cost basis (you’d want to sell and realize the loss for tax purposes instead), and restricted or illiquid securities unless the receiving organization has the infrastructure to accept and liquidate them. If you hold complex assets like private equity interests, C-Corp shares, or real estate investment trusts, a DAF or charitable remainder trust may be a better vehicle.
When a Donor Advised Fund Changes the Math
The 0.5% AGI floor introduced by the OBBBA creates a specific planning consideration: if your annual charitable giving is relatively small compared to your income, a portion of your donations now falls below the deductible threshold.
One approach that addresses this directly is bundling — concentrating multiple years of planned giving into a single tax year to clear the floor and maximize the deduction. A Donor Advised Fund makes bundling practical. You contribute appreciated stock to the DAF in one year, take the full deduction that year, and then direct grants to your chosen charities over the following years on your own timeline.
Consider a hypothetical scenario: a donor with a $1.5 million AGI who typically gives $15,000 per year. Under the new rules, the first $7,500 (0.5% of AGI) generates no deduction. By bundling three years of giving — $45,000 in appreciated stock — into one year through a DAF, the floor absorbs only $7,500 of a much larger contribution, and the remaining $37,500 is fully deductible. The grants to individual charities continue annually as before.
DAFs also offer flexibility for donors who receive stock in lumps — from a vesting schedule, a business sale, or an inheritance. Contributing shares during a high-income year, when the deduction is most valuable, and distributing the funds over subsequent years is a strategy worth understanding.
Choosing between a DAF, a charitable remainder trust, and other vehicles depends on what you’re trying to accomplish with your giving. Jessica and Emily walked through how to pick the right path on Off the Wall. Watch the episode.
Making Sure the Charity Can Accept Stock
Before initiating a transfer, confirm that the receiving organization has a brokerage account set up to receive non-cash gifts. Most large public charities and national organizations do. They’ll typically sell donated shares promptly to convert them to cash and avoid market risk.
Smaller organizations — local nonprofits, houses of worship, community food banks — may not have the infrastructure to accept stock directly. For those gifts, cash may be simpler for both parties, or the DAF route lets you donate the stock to the fund and then grant cash to the organization.
The IRS provides a Tax Exempt Organization Search tool to verify that an organization qualifies for tax-deductible contributions. You’ll also want written confirmation from the charity documenting the name and ticker of the shares, the number of shares, the fair market value on the date of donation, and a statement that no goods or services were exchanged.
What to Do Next
Donating appreciated stock is one of the most efficient ways to support the causes that matter to you — but the details of how, when, and through what vehicle depend on the specifics of your tax situation, your portfolio, and your giving goals. The 2026 rule changes add another layer of planning to get right.
That’s the kind of decision that benefits from coordination between your financial advisor, your CPA, and — if trusts or estate planning are involved — your attorney. As a fee-only fiduciary, Monument’s team works across all three of those relationships to make sure the strategy holds together. Prefer to listen? Jessica co-hosts Between Sips, where she and Emily cover unique ways to donate beyond writing a check. Listen on Apple Podcasts.
If you’d like to talk through how your charitable giving fits into your broader wealth plan — including whether bundling, a DAF, or a different approach makes sense for your situation — we offer a complimentary Wealth Check to get started. Let’s talk.
This article is for informational purposes only and does not constitute tax or legal advice. Tax laws are subject to change. Please consult a qualified tax advisor or attorney regarding your specific situation. Last updated: May 2026. Want to suggest an update to this article? Reach out to us at info@monumentwm.com.
¹ Past performance is not indicative of future results. Tax laws are subject to change. All tax figures reflect the 2026 tax year. Please consult a qualified tax advisor or attorney regarding your specific situation.
