How Does Donating Appreciated Stock to Charity Work?

Donating appreciated stock directly to a church, charity, or nonprofit gives you a charitable deduction for the full market value of the shares, and the gain you built up is never taxed. Sell the stock first and donate the cash, and you pay tax on that gain before the organization sees a dollar. Two conditions have to hold. You have to want to give in the first place, and the stock has to sit in a taxable brokerage account rather than a retirement account.

Marcus Mire, CPA and founder of MireGroup CPAs, walked through this on a recent Tax Tip Thursday, calling it a strategy a lot of taxpayers do not know exists. Most business owners understand that giving to a nonprofit produces a charitable deduction if they itemize. Far fewer know that the gift does not have to be cash.

Why give stock instead of cash?

Marcus is direct about the starting point.

"The backdrop here is that you want to be charitable and that you want to do it more efficiently. If you don’t want to be charitable, then this is somewhat kind of nonsense and you probably should move on."

Assume you do want to give. The question becomes which dollars you use. Cash in your checking account has already been taxed. Stock sitting in a brokerage account carries gain you have not paid tax on yet. Giving away the untaxed asset removes a future tax bill from your return and puts the full value in the charity’s hands on the same day.

What does the math look like?

Marcus uses NVIDIA in the video because a lot of people actually hold it and it has run up hard over the last few years. Say you bought it at $10,000 and it is worth $100,000 today.

• Your basis: $10,000
• Current market value: $100,000
• Unrealized gain: $90,000
• Charitable deduction if you donate the shares: $100,000
• Tax owed on the $90,000 gain: $0

"First, we’ve given something that we paid $10,000 for and gotten a $100,000 deduction. That hardly ever happens in the tax code."

The second piece is the one that carries more weight. That $90,000 of appreciation is never realized, so it is never taxed. You take the deduction and the gain disappears in the same transaction.

What happens if you sell the stock first?

You land in a worse position. Selling the shares realizes the $90,000 gain, and it goes on your return. Whatever you owe on it comes out of the proceeds before you write the check, so the organization receives after-tax money and your deduction shrinks to match. Same intent, less to the cause, more tax for you.

Marcus’s rule of thumb: get the value of the stock as the donation deduction, not your basis.

Which accounts does this work with?

Taxable accounts only. This is the caveat Marcus flags at the end of the video, and it is the one that catches people.

It works with a taxable brokerage account at Charles Schwab, Fidelity, Robinhood, or anywhere similar, where you pay tax on income in the account as you earn it.

It does not work with a Roth IRA, traditional IRA, 401(k), SEP IRA, or SIMPLE IRA. Those are deferred accounts with their own withdrawal rules and their own tax timing, and this strategy has no application there.

Where do donor advised funds fit in?

If you want to run this well, Marcus points toward a donor advised fund. You move the appreciated stock into the fund, take the deduction in the year you fund it, then direct grants out to specific organizations over time.

That separates the tax timing from the giving timing, which matters if you want to support the same causes every year but only have a large gain worth harvesting in one particular year. A full walkthrough of donor advised funds is coming in a separate video.

What to check before you move any shares

• Hold the shares longer than a year. Short-term holdings are generally deductible at cost basis rather than market value, which removes most of the benefit.
• Confirm the organization can accept securities. Many can. Smaller nonprofits sometimes need to open a brokerage account first, which takes time you may not have in December.
• Know that deduction limits apply based on your income and the type of organization, with unused amounts generally carrying forward.
• Transfer the shares themselves. Do not sell and wire the proceeds, because the sale is what creates the taxable gain.

Run it past someone before December

This is one tool among several, and it fits some returns better than others. Whether it makes sense for you depends on what you own, what you already give, and what the rest of your year looks like. That is the kind of question year-round tax advisory work is built to answer, rather than something to sort out in April when the year is already closed.

We would love to help. See our plans and pricing at mire.group/accounting-and-tax-plans, or reach out at mire.group/work-with-us.

Frequently asked questions

Why would you want to donate stock instead of writing a check?

Because the stock carries untaxed gain and the cash does not. When you hand over shares that have appreciated, you deduct the full market value and the appreciation is never taxed to anyone. Write a check instead and you are giving away money that has already been through your return once.

Do I have to itemize my deductions for this to work?

Generally yes. The charitable deduction only produces a benefit if you itemize rather than taking the standard deduction. This is one reason donor advised funds pair well with the strategy, since concentrating several years of giving into one year can push you over the itemizing threshold.

What if my stock has gone down instead of up?

The logic reverses. If a position is worth less than you paid for it, you are usually better off selling it, claiming the capital loss on your return, and donating the cash proceeds. Donating a depreciated stock outright wastes the loss.

Does the charity have to pay tax when it sells the stock?

A qualified tax-exempt organization does not pay capital gains tax on the sale. That is why the full value reaches the cause. Most organizations that accept securities sell them shortly after receipt and use the proceeds.

Can I do this with stock in my 401(k) or IRA?

No. Those are deferred retirement accounts, and this strategy only applies to stock held in a taxable brokerage account. Charitable giving from retirement accounts runs on entirely separate rules, including the qualified charitable distribution rules that apply once you reach a certain age.