Giving Stocks Instead of Cash: How and Why To Start

Most people donate to charity by giving cash (or more appropriately an electronic transfer from your bank, either once or every month). Still, there’s a way to give that can save you thousands in taxes: donating appreciated stock. Instead of selling stock, paying taxes on the gains, and then giving what’s left, you can donate the stock directly to a charity. This allows you to avoid capital gains taxes and claim a deduction for the full value of the stock.

Here’s a real example: A client of mine bought stock for $10,000 years ago, and it had grown to nearly $44,000. If they had sold it, they would have owed about $5,000 in capital gains taxes, since their gain was $34,000 and they were in the 15% capital gains tax bracket. Instead, they will be donating the stock directly to a charity. This allowed them to skip the capital gains tax entirely, claim a deduction for the full $44,000, and ensure the charity received the maximum value—since charities don’t pay taxes when they sell the stock!

This strategy is especially useful if you already give to charity. Instead of donating cash from your paycheck, you can use appreciated stock and keep more of your cash available for investing or other expenses. It’s also great for people who have investments that have grown significantly and want to rebalance their portfolio without triggering taxes.

One common strategy we use is to take the cash flow from your monthly giving and redirect it to investments. Then, you can redo the process in a few years! Or if you need to sell for another purpose down the road, you will have fewer capital gains taxes to pay since you bought the stock at a higher price. Woo!

To qualify, you must have held the stock for over a year, and you generally need to itemize deductions to benefit from the charitable write-off. Many larger charities and donor-advised funds accept stock donations, making the process straightforward. If you’re planning to give, it’s worth checking whether this strategy makes sense for you with an advisor or tax professional. It works best as part of a larger over-arching plan.

By donating stock instead of cash, you can give more, pay less in taxes, and keep your financial plan working efficiently. If you have appreciated investments, this is one of the smartest ways to maximize both your wealth and your impact.