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Most donors think of monthly gifts, one-time donations, or donor-advised funds when giving to their favorite charities. But there's another option that often goes overlooked: donating stocks to charity.
By donating appreciated stocks you've held for over a year, you can avoid capital gains tax while still claiming the full market value as a tax deduction. This strategy allows you to give significantly more without increasing your taxes.
For donors with investment portfolios, stock donations represent one of the most rewarding methods available today - research shows this approach can increase charitable contributions by up to 66%.
In this guide, we’ll walk you through the benefits, process, and tax implications of making stock donations to nonprofits, helping you maximize both your charitable impact and personal tax advantages.
Stock donations are a way for donors to give shares of a company to charity instead of cash. These can include publicly traded stocks, bonds, or shares of ETFs and mutual funds. The nonprofit can either decide to keep these stocks for some time or sell them right away for cash to support its mission needs.
4 benefits of donating stocks to charity
1. Eliminate capital gains taxes: According to the IRS, donating appreciated stocks (shares that have increased in value since purchase) directly to a qualified charitable organization allows donors to avoid paying capital gains tax on the appreciation.
2. Maximize tax deductions: When you donate stocks you’ve owned for over a year to a nonprofit, you can claim a tax deduction for their fair market value, not just their original purchase price. This allows you to potentially get a bigger deduction.
3. Simplify charitable giving: Using a Donor-Advised Fund (DAF) takes the administrative burden from donors as the sponsoring organization handles all paperwork and manages the transfer or sale of their donated stocks.
4. Give more without spending more: Donating appreciated stocks allows donors to give the full market value to charity, turning their original investment into a larger gift without incurring any additional costs.
How to donate stocks to charity?
1. Direct donation to the charity
Donors can only make a direct donation to a charity if that organization accepts stock donations. Most charities that do so specify it on their website or online donation page. This method involves transferring stocks directly from the donor’s brokerage account to the charity’s brokerage account.
Steps to follow for donating stocks:
Contact the charity to confirm they accept stock donations and request their brokerage details (firm name, account number, and DTC number).
Instruct the financial institution or advisor to transfer the specified shares to the charity’s account using the stock transfer form.
Notify the charity about the transfer, including the name of the stock, number of shares, and expected transfer date.
Request a written acknowledgment from the charity for tax purposes.
Save the transfer confirmation and acknowledgment letter for tax filing.
2. Donor-Advised Funds (DAF)
A donor-advised fund is an account managed by an organization. Donors give appreciated stocks, get a tax deduction right away, and can choose which charities to donate to over time.
The sponsoring organization manages the investment, liquidation of assets, grant distribution, and record-keeping, reducing the donor's administrative burden.
Steps to follow for donating stocks:
Open a donor-advised fund account with a sponsoring organization (e.g., Fidelity Charitable, Schwab Charitable).
Contribute appreciated stocks to the DAF account. The sponsoring organization handles the liquidation.
Obtain a tax acknowledgment letter from the DAF sponsor.
Recommend grants to the interested charities from the fund over time.
Donor-advised funds (DAFs) allow donors to contribute stocks to an account managed by an organization, from which they can recommend grants to charities over time. This provides more flexibility and reduces administrative work compared to direct stock donations.
A charitable trust allows you to donate stocks while potentially receiving income. With a Charitable Remainder Trust (CRT), you receive regular payments for a set period, after which the charity receives the remaining assets. Conversely, a Charitable Lead Trust (CLT) provides income to the charity first, with the remaining assets later transferred to your beneficiaries.
These options are best suited for substantial donations and require consultation with financial and legal advisors to ensure proper setup.
Steps to follow for donating stocks:
Work with an attorney or financial advisor to establish the trust.
Transfer appreciated stock into the trust that may sell the stock and reinvest the proceeds.
Receive income distributions from the trust (in the case of a CRT) or allow the charity to receive income first (in a CLT).
Collect the necessary paperwork related to the donations made for tax reporting.
Private foundation
If you've established a private foundation, you can donate stocks to it and later distribute grants to multiple charities over time. This approach gives you ongoing control over which organizations receive support and when. However, this option comes with administrative responsibilities, annual IRS filings, and compliance with distribution requirements.
Most suitable for donors planning substantial, long-term charitable giving.
Steps to follow for donating stocks:
Set up a private foundation if not already established.
Transfer stocks to the foundation’s brokerage account.
The foundation can either sell the stocks immediately or hold them as investments.
Use the proceeds to make grants to charities aligned with the foundation's mission.
Keep detailed records of donations for IRS reporting and complete required annual filings.
Tax implications for donors giving stocks
When donors give long-term appreciated securities directly to a registered 501(c)(3) nonprofit organization, they can generally claim a charitable income tax deduction equal to the fair market value of the securities on the date of the donation.
This deduction is typically limited to 30% of the donor’s adjusted gross income (AGI), with a five-year carryforward allowed for any unused portion. The carryforward is subject to the same percentage limitations in future years.
Stocks must be held for more than one year to qualify as long-term capital gain property and be eligible for deduction at full fair market value. Those held for one year or less (short-term) are only deductible on a cost basis, not the fair market value.
For publicly traded stocks, donors can typically deduct the fair market value at the time of the contribution.
If the donor gives to certain private foundations, the limit may be 20% of AGI instead of 30%. A qualified appraisal may also be required for privately held stock, and additional documentation must be submitted with IRS Form 8283.
How can donors claim a tax deduction for stock donations?
To claim a tax deduction for donating appreciated stock, donors must file Form 8283 along with their federal tax return (Form 1040) for the year the donation was made. This is the official document the IRS uses to track noncash charitable contributions, including shares of stock.
For stock donations, there are two parts to this form:
Section Ais for publicly traded stock listed on the public exchange, regardless of the amount, even if it’s worth over $5,000. No appraisal is required for publicly traded stock.
Section Bis for non-publicly traded stock or other noncash items worth more than $5,000. In this case, donors also need a qualified appraisal and a signature from the receiving charity to verify the donation.
If donors are donating non-publicly traded stock valued over $10,000, they must also get a qualified appraisal and include the details in Form 8283. The appraiser must also sign the form. Given the complexity of this process, it is recommended to consult with a tax advisor.
Once this form is complete, it must be attached to the individual tax return and filed by the regular tax deadline, unless there is an extended deadline.
Donors are also required to obtain a written acknowledgment from the charity if their donation is valued at $250 or more. This acknowledgment must include the name of the organization, a description of what is donated, and a statement confirming whether the donor received any goods or services in return. No need to send this to the IRS, but keep it safely stored for record-keeping purposes.
If the charity sells the donated stock within three years, it is required to file Form 8282 and send a copy to the donor. Donors don’t need to do anything with it, but they should keep it with their records in case the IRS asks for it later.
How can nonprofits accept stock donations?
1. Set up a brokerage account
A nonprofit must have an active brokerage account with a financial institution to receive shares directly from the donor’s brokerage account.
To create this account, choose a reputable financial services provider or brokerage firm such as Charles Schwab, Fidelity, or Vanguard. These firms are widely recognized and experienced in handling charitable transfers, offering dedicated support to nonprofits.
Make sure the account is registered under the nonprofit’s legal name and tax identification number.
2. Define a stock donation policy
Define a formal policy that outlines how the organization will manage stock donations. This ensures internal alignment and builds donor confidence by demonstrating that contributions will be handled responsibly and utilized effectively.
The policy should address the following:
The type of securities accepted (for example, publicly traded, mutual funds, private stock)
The process for liquidating stocks (for example, sell immediately or hold)
The way a nonprofit will acknowledge and value the gift
3. Share transfer instructions with donors
Create a dedicated webpage where donors can access clear, step-by-step instructions for making a stock donation. Include all relevant details such as the brokerage firm’s name, account number, DTC number, and the contact information of the staff member responsible for managing stock gifts.
Once the webpage is live, add a clear and accessible link on the main donation form, allowing donors to easily choose stock giving as a method of support.
4. Promote the stock donation option
The nonprofit must actively promote stock donation opportunities through all its fundraising channels. Use the donor database to identify individuals, such as investment professionals and business owners, who are more likely to hold appreciated assets.
Send targeted email campaigns to these donors, highlighting the long-term impact of their stock donations. Consider hosting a webinar to guide donors through the stock donation process and address common questions or concerns that may be holding them back.
5. Acknowledge the gift in writing
Once the stock gift is received, nonprofits must provide the donor with a formal written acknowledgment. This is required not just to fulfill IRS requirements but also to help donors claim tax benefits for their giving. This essential document should include:
The specific stock that was donated (company name and exact number of shares)
Exact date when the organization received the donation
A clear statement confirming that no goods or services were provided in exchange for the gift (required for tax deduction eligibility)
Final words on donating stock to charity
Donating appreciated stocks is one of the most effective and tax-smart giving strategies available to donors today. By avoiding capital gains tax while claiming the full market value as a deduction, you transform investment growth into meaningful support for causes and nonprofits you care about.
While the process requires more paperwork than cash donations, the financial benefits make it worthwhile for both you and your chosen nonprofits.
Be sure to consult your financial advisor to determine which appreciated securities in your portfolio can have the greatest charitable impact while maximizing your tax benefits.
FAQs on stock donations to nonprofits
Donating stock to charity can be better than cash for both parties, as you avoid taxes on stock growth, while the recipient benefits from future value increases.
When someone inherits stocks, the purchase price is reset to the stock's value on the inheritance date (not the original purchase price). This means if they sell later, they pay less tax, and the gift provides more value than the same amount in cash.
Most charities can accept publicly traded stocks (those listed on major exchanges like NYSE or NASDAQ). Some private company shares, restricted stock, or other complex securities may pose challenges for certain nonprofits. Many larger organizations have the proper setup to handle various securities, while smaller charities might be limited.
Always check with the chosen charity beforehand to confirm they can accept your specific type of stock donation.
Many nonprofits accept stock donations because they offer potentially more value to the organization. American Red Cross, United Way, Habitat for Humanity, and many other leading organizations have systems in place to process stock donations, with details available on their website.
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