Note: This article was originally published in 2021 and updated in April 2026 to reflect changes introduced by the One Big Beautiful Bill Act (OBBBA) and current tax rates.

When it comes to charitable giving, your instinct may be to reach for your checkbook or credit card. But if you’re looking to potentially increase your gift and tax deduction, consider donating your appreciated stocks directly to charity.

When Donating Stock to Charity is a Good Idea

Donating appreciated shares of stock can provide two important tax benefits.

First, if you donate a security with an unrealized capital gain directly to charity, you won’t have to pay capital gains tax on the sale of the stock. If you’re above the Net Investment Income Tax (NIIT) threshold, you will also avoid paying the Medicare surtax (3.8%). This could mean eliminating 23.8% in federal taxes if you’re in the top tax bracket. And because the charity is a tax-exempt organization, they won’t pay capital gains tax either when they sell the stock.

Second, if you itemize your tax deductions, your charitable deduction will be based on the fair market value (FMV) of the stock at the time of transfer (assuming you’ve owned the stock for more than 1 year).

These two factors mean it’s often best to donate the stock in your portfolio with the largest unrealized gain because it offers the greatest potential tax benefit.

But also consider these scenarios:

• If you are planning to rebalance your portfolio to get it back in line with your target asset allocation, you could donate the overweighted shares
• If you have a concentrated position in one stock—potentially from your employer stock compensation—you can donate some shares to reduce concentration risk in your portfolio
• By directly donating stock, you may have more money to give to charity than if you sold the stock, paid the taxes, and donated the cash—a win-win for both you and the charity.

Ground Rules for Donors

Rule #1: Be aware of the AGI deduction limits — and the new rules introduced in 2026.

The One Big Beautiful Bill Act (OBBBA), passed in July 2025, significantly updated charitable deduction rules starting in 2026.

Here’s what you need to know:

Adjusted Gross Income (AGI) Deduction Caps (unchanged):

• Cash donations to public charities: deduct up to 60% of AGI (now permanent under OBBBA)
• Stock donations to public charities and private operating foundations: deduct up to 30% of AGI
• Stock donations to private non-operating foundations: deduct up to 20% of AGI
• Unused deductions may be carried forward for up to five years

New Rules for Itemizers Starting in 2026:

• New 0.5% AGI floor: Only charitable contributions exceeding 0.5% of your AGI are deductible. For example, if your AGI is $200,000, the first $1,000 of your donations is not deductible. This floor applies to all charitable contributions regardless of asset type.
• 35% cap for top-bracket donors: If you’re in the 37% federal tax bracket, the tax benefit of your itemized deductions—including charitable deductions—is now capped at 35 cents per dollar rather than 37 cents.

New Benefit for Non-Itemizers Starting in 2026:

Even taxpayers who take the standard deduction can now deduct up to $1,000 (single filers) or $2,000 (married filing jointly) in cash donations to qualified operating charities. Note: this applies to cash only — not stock donations — and does not apply to contributions to Donor Advised Funds or private foundations.

⚠ Planning Note: The OBBBA’s 0.5% AGI floor means smaller donations may generate little or no deduction for high-income donors. Consider bundling multiple years of planned giving into a single year—using a Donor Advised Fund (DAF) makes this easy—to clear the floor and maximize your deduction.

Rule #2: Keep your receipts.

The charity should provide you with written confirmation of your contribution. You’ll want records showing:

• Name, address, and tax identification number of the charitable organization
• Date of your contribution
• Description of the stock (name, ticker, number of shares, FMV on the date of donation)
• Confirmation that no goods or services were received in exchange for the donation (if you want to fully deduct the donation)

Stocks You Might Consider Donating

Stocks you’ve owned for over a year—Securities owned for at least one year and one day are considered long-term capital gains. When you donate these shares to charity, you’ll receive a tax deduction equal to the full fair market value (FMV) of the stock on the date of transfer. (Technically, your deduction will be the average of the stock’s highest and lowest selling prices that day.)

Highly liquid stocks—Before transferring stock, you need to make sure the charity is willing to directly accept non-cash gifts. Charities typically look to sell stock gifts as quickly as possible, both to generate cash and to reduce the risk that the stock value will go down. It’s often easiest for charities to accept stock that is trading on a public exchange and easy to liquidate.

Think Twice Before Donating These Stocks

Stocks owned for less than a year—If you’ve owned the stock for one year or less, your charitable deduction will be limited to your cost basis in the stock. While you can still donate these stocks, your tax benefit is greatly reduced.

Stocks that have lost value—In most cases, you won’t want to donate stocks that have decreased in value below your cost basis. You will likely want to realize these losses, as there are tax benefits to you, including netting against any realized capital gains or carrying the loss forward to future tax years.

Complex assets—Some charities may not be equipped to handle complex assets, such as privately held C-Corp or S-Corp shares, private equity and hedge fund interests, commodities, and real estate investment trusts (REITs). Consider transferring these assets to a charitable giving vehicle such as a Donor Advised Fund (DAF) or a charitable trust.

Restricted stock—Just like complex assets, you need to be sure the charity has the resources and experience to accept and liquidate restricted stock. Additionally, if you are considered a “control person” in your company, you will be subject to SEC Rule 144. If the organization does not have the systems in place to accept restricted stock, consider donating to a DAF.

Types of Charities You Can Donate Stock To

There’s no shortage of good causes out there. For those seeking to make a tax-deductible donation, it’s important to double-check that you’re contributing to a qualified charity. The IRS provides a Tax Exempt Organization Search tool to verify eligibility.

As a donor, you should also be aware of the differences between public charities, private operating foundations, and private non-operating foundations.

When donating stock, the AGI deduction limit varies:

• Public charities and private operating foundations: up to 30% of AGI
• Private non-operating foundations: up to 20% of AGI

Some investors find it advantageous to set up a DAF to facilitate stock donations. An investor can transfer appreciated stock to a DAF, take an immediate tax deduction, and then direct grants to charities of their choosing at any future date. DAFs also offer flexibility when liquidating stock, allowing conversion to cash or reallocation to other investments.

When’s the Best Time to Donate?

Whether for tax planning reasons or the season of giving, most people tend to think about charitable donations near the end of the year. While most charities are happy to accept contributions at year’s end, receiving donations throughout the year helps organizations better project their financials and budget.

Market volatility can have an outsized impact on the timing of your stock donation, particularly if you’ve previously pledged a specific dollar amount to an organization. If the FMV of the stock you’re donating declines, you’ll need to donate additional shares to meet your charitable obligation. Investors should keep a close eye on market fluctuations, opting to make their most substantial donations while their share value is up.

When It’s Not Such a Good Idea to Donate

While directly donating a portion of your stock portfolio can provide numerous opportunities to minimize your taxes and boost your charitable giving, there are a few exceptions. Some smaller charities (for example, houses of worship, foster homes, or local food pantries) may not have a brokerage account set up to receive and sell stocks. For these organizations, cash donations may be a better option.

Remember that you will only receive a tax deduction if you itemize your deductions. If you typically fall below the standard deduction threshold, consider a Donor Advised Fund (DAF) as a way to “bucket” several years’ worth of contributions into one tax year. For example, if you make an annual gift to a charity, consider “pre-funding” five or ten years’ worth of annual gifts to the DAF in one year. Depending on the size of your donation, you may exceed the standard deduction limit in order to receive the charitable itemized deduction. The DAF allows you to then distribute donations to charities over multiple years.

Important 2026 note: The new 0.5% AGI floor introduced by the OBBBA means that if your planned stock donation is modest relative to your income, you may not receive a deduction for the full amount. Bundling multiple years of giving into one year—again, a DAF makes this easy—can help you clear the floor and maximize your deduction.

Want to Optimize Your Charitable Giving?

Charitable giving can be a fulfilling part of having wealth. Through your own financial wellness, you can make a positive impact on the causes you care about most. Still, you don’t just want to give blindly. When structuring your donations, there are a number of challenges you may encounter—tax pitfalls, deduction limits, new AGI floors, liquidation issues—which is why it’s important to stay well-informed about contribution rules and requirements.

To maximize the benefit—for both yourself and the recipient of your donation—you’ll need a strategy that is personalized to your specific financial needs and objectives. By helping you design a customized plan for growing your wealth over time, our team at Monument can help you consider all available charitable giving options, providing a clearer understanding of why it’s worthwhile to choose one over another.

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: April 2026. Want to suggest an update to this article? Reach out to us at info@monumentwm.com.