are stock donations tax deductible? A U.S. tax guide

Summary

Donors often ask: are stock donations tax deductible when transferring shares to charity? Short answer: yes—donating qualified stock to an eligible U.S. charity can produce a federal income tax deduction and usually avoids capital gains tax on appreciated publicly traded shares, but the benefit depends on the type of stock, how long you’ve owned it, the kind of charity, and meeting IRS documentation and reporting rules. This article explains the rules, practical steps, examples, and common pitfalls so you can act confidently and coordinate with your broker, the recipient charity, or a donor-advised fund. As of June 2024, according to IRS Publication 526 and guidance from major donor-advised fund providers, the core principles remain: long-term appreciated marketable securities are the most tax-efficient gifts.

Note: This article focuses on U.S. federal income tax rules and general practice. State tax rules and updates after June 2024 may differ. Consult the IRS, your tax advisor, or charity for final guidance.

Overview

Donors asking “are stock donations tax deductible” typically mean: if I give shares I own to a qualified charity, can I claim a U.S. federal income tax deduction and avoid capital gains tax? In many cases, yes. The main tax rationale is this:

• If you donate long-term appreciated publicly traded stock directly to a qualified U.S. charity, you generally may deduct the fair market value (FMV) of the stock and avoid recognizing the capital gain you would have had if you sold the shares first. This can be more tax-efficient than selling the shares, paying capital gains tax, and donating the net proceeds.

• The IRS treats the date and method of transfer, donor holding period, donee type (public charity, donor-advised fund, private foundation), and valuation method as determinative factors for the deductibility and limit calculations.

Because readers may ask “are stock donations tax deductible” in different contexts, this guide covers: qualified donees, types of stock, holding periods, limits tied to adjusted gross income (AGI), documentation and reporting, how to donate stock practically, donor-advised funds, examples, pitfalls, and FAQs.

Qualified donees (Which organizations qualify)

When you ask “are stock donations tax deductible,” the answer depends partly on who receives the gift. To be deductible for U.S. federal income tax purposes, the recipient must generally be a qualified organization—most commonly a 501(c)(3) public charity.

• Public charities (501(c)(3)): Gifts to these organizations typically allow the most favorable deduction treatment for long-term appreciated securities (deduction often limited to a percentage of AGI—see limits below).

• Donor-advised funds (DAFs): Gifts made directly to a DAF sponsor (a public charity that operates a donor-advised fund) are normally deductible when contributed. Donors receive an immediate tax benefit and can recommend grants later. DAFs are a common vehicle for donating appreciated stock because they provide orderly sale and grant processing.

• Private foundations: Gifts to private foundations are allowed but subject to stricter percentage limits and additional excise and self-dealing rules. When considering “are stock donations tax deductible” for a private foundation, expect lower AGI limits and more compliance details.

• Other organizations: Gifts to individuals, political organizations, or non-qualifying entities are generally not deductible.

When in doubt, request and keep the donee’s tax-exempt determination letter or confirm the charity’s public charity status before relying on a deduction.

Types of stock and how they affect deductibility

Publicly traded (marketable) securities

If you’re wondering “are stock donations tax deductible” and the stock is publicly traded, the typical favorable outcome arises when the donor has held the shares for more than one year (long-term). Key points:

• Deduction amount: For long-term appreciated marketable securities donated to a public charity, the deduction is generally the fair market value (FMV) on the date of contribution.

• FMV determination: For publicly traded securities, FMV is usually the market price on the date of contribution (many brokers and charities use the average of the high and low on that date or the closing price). Keep transfer confirmations showing the date and shares transferred.

• Capital gains avoidance: Donating long-term appreciated stock transfers the built-in gain to the charity; the donor generally does not recognize capital gain and therefore avoids the associated tax.

• Practical note: For publicly traded stock, because valuation is straightforward, appraisal requirements are minimal compared with closely held stock.

Closely held / private company stock

Donors often ask “are stock donations tax deductible” when dealing with private company shares—this is more complex.

• Valuation: Closely held stock lacks a public market price. Determining FMV requires a qualified appraisal and carries higher substantiation burdens.

• Deduction limits: The IRS scrutinizes gifts of closely held stock more carefully; for certain nonpublic stock or where the donor retains control or makes a bargain sale, deductions may be limited or disallowed.

• Liquidity: Many charities cannot accept closely held stock, or they may immediately sell it at a substantial discount, so confirm acceptance and plan for appraisal and escrow.

• Special rules: Gifts of privately held stock may be treated differently if the donor or related parties retain rights or expect proceeds.

Short-term holdings (owned ≤ 1 year)

If you ask “are stock donations tax deductible” and the stock was owned one year or less, the rules differ:

• Deduction generally limited to donor’s cost basis for short-term (≤1 year) holdings or property converted from ordinary income.

• The donor cannot claim the FMV deduction for short-term appreciated securities; donating long-term holdings is often the superior strategy for maximizing tax benefit.

• Holding-period matters because the IRS distinguishes long-term capital gain property vs short-term or ordinary-income property for deduction purposes.

Restricted stock, stock options, ESPP, phantom stock

Special equity-based compensation introduces additional complexity when you consider “are stock donations tax deductible.” General guidance:

• Restricted stock: If you donate vested restricted stock you own and for which you already recognized income, normal rules for long-term vs short-term holdings and FMV may apply. If the stock is still subject to substantial risk of forfeiture, transfer may be disallowed or treated as taxable to you.

• Stock options / ISOs / NSOs: You cannot donate an unexercised option as a stock gift in the same way as shares. If you exercise and hold shares, donation rules apply based on the holding period measured from the exercise date (and possible ISO-specific tax consequences).

• Employee Stock Purchase Plan (ESPP) shares: Tax treatment depends on whether the disqualifying or qualifying disposition rules apply; timing of donation relative to purchase and holding period matters.

• Phantom stock / restricted units: These often represent contractual rights, not transferable market shares; donation generally not possible until actual shares or cash are distributed.

Given these complexities, consult a tax advisor when donating compensation-related equity.

Tax benefits and limitations

Avoidance of capital gains tax

One major reason donors ask “are stock donations tax deductible” is the capital gains benefit. When you donate long-term appreciated publicly traded stock directly to a qualified charity, you generally:

• Avoid paying capital gains tax on the appreciation that would otherwise be recognized on a sale.
• Obtain a potential income tax deduction for the FMV, subject to percentage limits relative to AGI.

This combination—FMV deduction + no capital gains tax—often results in a higher after-tax charitable impact than selling and donating cash.

Income tax deduction — fair market value vs basis

The IRS distinguishes between long-term appreciated property and short-term or ordinary-income property.

• Long-term appreciated securities (held > 1 year): Deduction generally allowed for FMV (subject to AGI limits) when donated to a public charity.

• Short-term holdings (≤ 1 year) or ordinary income property: Deduction is typically limited to the donor’s cost basis.

This difference is central to answering “are stock donations tax deductible” because the magnitude of the deduction shifts based on the holding period.

Adjusted Gross Income (AGI) limits and carryforward

Donors should plan for AGI limits when asking “are stock donations tax deductible.” Key points:

• For gifts of long-term appreciated securities to public charities, the deduction is typically limited to 30% of the donor’s AGI.

• For gifts to private foundations, the limit is generally lower—commonly 20% of AGI for appreciated securities.

• Cash gifts to public charities historically had higher limits (e.g., 60% of AGI in many tax years), but rules and percentages may change; always confirm current IRS guidance.

• Disallowed amounts may usually be carried forward up to five subsequent tax years, subject to the same limits in each year.

• As of June 2024, the five-year carryforward rule remains standard practice under IRS Publication 526, but percentage limits and special provisions can change—verify current tax-year rules.

Other tax interactions

• Net Investment Income Tax (NIIT): Donating appreciated securities can reduce net investment income subject to the 3.8% NIIT in applicable situations.

• State and local taxes: State tax treatment of charitable deductions varies. Some states conform to federal rules; others limit or modify treatment. Donors may see reduced federal deductions if state credits apply.

• Alternative Minimum Tax (AMT): Charitable deductions generally reduce AMT income in similar fashion, but donors should check their AMT exposure.

Documentation, valuation, and reporting requirements

When donors ask “are stock donations tax deductible,” compliance with IRS documentation is essential to claim the deduction.

Records to keep

Maintain clear records to substantiate the gift and the deduction:

• Broker transfer confirmation showing number of shares, security, and date of transfer.
• Written acknowledgment from the charity for gifts of $250 or more (required by IRS for any charitable deduction of $250+).
• Copies of brokerage statements showing basis and acquisition date (to establish holding period and basis).
• For non-public or high-value gifts, a qualified appraisal and the appraiser’s summary (see form rules below).
• Any correspondence or gift agreements describing restrictions or conditions.

Keep records for as long as the statute of limitations may apply (typically at least three years from filing; longer if carryforwards or disputes are possible).

Forms and filings (IRS)

• Form 1040 Schedule A: Charitable contributions are itemized on Schedule A (Form 1040). Only itemizing taxpayers can claim these deductions (unless special provisions are in effect).

• Form 8283 (Noncash Charitable Contributions): When the total value of noncash contributions for the year exceeds $500, Form 8283 must be completed and attached to the return. Requirements by value:

  • Over $500: Complete Form 8283.
  • Over $5,000: Section B may be required (and for non-publicly traded property, a qualified appraisal and signature may be required). For publicly traded securities, you still report details and often require a receiving organization signature for contributions >$5,000.
  • Very large gifts (e.g., >$500,000) may trigger additional appraisal and disclosure requirements.

• Qualified appraisal: For many non-public gifts valued above certain thresholds, a qualified appraisal by a qualified appraiser must be obtained and attached or summarized per Form 8283 instructions.

• Charity written acknowledgment: For any single contribution of $250 or more, obtain a contemporaneous written acknowledgment from the charity indicating the amount and whether you received goods or services in return.

Refer to Form 8283 instructions and IRS Publication 526 for current thresholds and detailed filing instructions.

Valuation rules and appraisals

• Publicly traded securities: FMV is normally market price on the date of contribution; brokerage transfer records can substantiate FMV.

• Nonpublic stock: Requires a qualified appraisal for substantial values and strict substantiation. The IRS scrutinizes valuations in these cases.

• Gift date: For electronic transfers, the date of gift is the date control passes to the charity (the date the securities are received in the charity’s account or DTC position), not necessarily the trade date if market sale is involved. Keep transfer confirmations.

How to donate stock (practical steps)

Answering “are stock donations tax deductible” is only useful if you can execute the gift correctly. Typical steps:

1. Confirm the recipient can accept stock: Ask the charity, DAF sponsor, or private foundation whether they accept securities and request transfer instructions.
2. Obtain transfer instructions: Charities or DAFs typically give a broker name, DTC number, and account number to deliver the shares.
3. Instruct your broker: Provide your broker with the donee’s account details and the number of shares to transfer. For Bitget-related services, coordinate with Bitget Wallet and Bitget support if using custody or on-ramp services for tokenized securities where applicable.
4. Note the gift date: Record the date the charity receives the shares; that date determines the FMV and gift year.
5. Obtain written acknowledgment: After the transfer completes, obtain a contemporaneous written acknowledgment from the charity showing the date and number of shares received.
6. Recordkeeping for tax filing: Keep brokerage confirmations, the charity acknowledgment, and Form 8283 records if required.

If you wish the charity to sell the shares immediately, confirm with the charity whether you want them to sell or retain shares. For donor-advised funds, the sponsor usually sells and holds cash to facilitate later grants.

Donor-advised funds (DAFs) and other vehicles

Donors often ask “are stock donations tax deductible” specifically about DAFs because DAFs simplify donating appreciated stock.

• Immediate deduction: When you contribute stock to a DAF, you generally receive an immediate tax deduction for the FMV (subject to AGI limits) even though you may advise grants later.

• Processing: DAF sponsors usually accept securities, sell them, and place proceeds in the fund for later grant recommendations, simplifying liquidity and recordkeeping.

• Flexibility: DAFs let you separate the timing of the tax deduction from the timing of charitable grants.

• Caution: The donation is irrevocable; you cannot get your securities back once contributed. Also avoid prearranged sale agreements that might affect deductibility.

As of June 2024, major providers (for example, large national DAF sponsors) emphasize the tax efficiency of donating appreciated securities to DAFs for donors seeking an immediate deduction and flexible grant timing.

Examples and numerical illustrations

Practical examples help clarify the question “are stock donations tax deductible” by comparing donating appreciated stock versus selling and donating cash.

Example 1 — Donating appreciated public stock (simplified):

• You bought 1,000 shares at $10 per share (basis = $10,000).
• Current market price = $50 per share → market value = $50,000.
• Long-term holding (>1 year).

Option A: Donate shares directly to a public charity.

• Deduction: FMV = $50,000 (subject to AGI limits).
• Capital gains tax avoided: Built-in gain = $40,000 (not recognized), so no capital gains tax due on the $40,000 gain.

Option B: Sell shares, pay capital gains tax, donate net proceeds.

• Assume a 15% long-term capital gains tax + 3.8% NIIT in certain cases → effective capital gains rate ~18.8% (example)—tax on $40,000 gain = $7,520.
• After-tax proceeds ≈ $42,480; charitable deduction if donated cash = $42,480.

Net difference: Direct donation typically yields a larger immediate deduction ($50,000 vs $42,480) and avoids $7,520 in capital gains tax, making direct donation more tax-efficient.

Example 2 — Short-term holding donated (simplified):

• You bought shares 6 months ago at $10, now worth $50. If you donate, deduction limited to basis ($10 per share * 1000 = $10,000) vs FMV of $50,000. In this case donating long-term holdings would be far more beneficial.

These examples illustrate why donors often ask “are stock donations tax deductible” and how holding period and the type of donee materially affect the outcome. Exact tax savings depend on your marginal tax rate, capital gains rate, NIIT exposure, state taxes, and AGI limits.

Potential pitfalls and special considerations

When planning gifts and asking “are stock donations tax deductible,” watch for common pitfalls:

• Prearranged sale: If you have an agreement to sell the securities after transfer (e.g., you direct a charity to sell to benefit you or a related party), deductibility can be disallowed.

• Donating short-term holdings expecting FMV treatment: If you give securities held ≤1 year expecting FMV deduction, the IRS may limit deduction to basis—check holding periods first.

• Charity cannot accept securities: Some charities don’t accept direct securities transfers. Confirm acceptance and obtain transfer instructions.

• Valuation disputes: For nonpublic securities and very large gifts, the IRS may challenge FMV—use qualified appraisals when required.

• Year-end timing: Transfers in transit at year-end can cause confusion about which tax year the gift applies to—ensure the charity’s receipt date is documented.

• State rules and limits: Your state may not fully conform to federal rules; consult a state tax professional.

• Self-dealing rules: When giving to private foundations or DAFs with family interests, be careful about prohibited transactions and self-dealing rules.

Always coordinate with the donee and your broker to ensure the transfer method and timing support your desired tax year and deduction.

Differences when donating to private foundations vs public charities

If you ask “are stock donations tax deductible” with a private foundation as the recipient, expect differences:

• Lower AGI limits: Deductions for long-term appreciated property to private foundations are typically limited to a lower percentage of AGI (commonly around 20%), compared with approximately 30% for public charities.

• Additional rules: Private foundations face excise taxes, payout requirements, and self-dealing rules that may affect the donor in complex arrangements.

• Closely held stock complications: Donating closely held stock to a private foundation raises additional scrutiny and possible reduced deductibility.

Plan with legal and tax counsel when sizable gifts to private foundations are contemplated.

International or state-specific considerations

The question “are stock donations tax deductible” is U.S.-focused here. Important caveats:

• State tax: State tax deductions and credits vary. Some states follow federal rules closely; others do not. Check state law.

• Non-U.S. donors: Donors who are not U.S. taxpayers should not assume U.S. federal deductions apply; local tax law and treaty considerations determine deductibility.

• Cross-border gifts: Donating shares of foreign-listed securities or donating to non-U.S. charities introduces valuation, withholding, and eligibility issues.

Consult local tax counsel for non-U.S. or cross-border gifts.

Frequently asked questions (FAQ)

Q: Can I deduct the full market value if I donate appreciated shares? A: For long-term appreciated publicly traded securities donated to a qualified public charity, you generally can deduct the FMV as of the date of contribution, subject to AGI percentage limits. For short-term holdings or certain property types, deduction may be limited to basis.

Q: What records will the charity provide? A: Charities should provide written acknowledgments for gifts of $250 or more and, upon request, details of the transfer. For gifts over reporting thresholds, the donee’s signature on Form 8283 may be required.

Q: How is the gift date determined for electronic transfers? A: The gift date is usually the date control passes to the charity—the date the shares are received in the charity’s account—not the date you placed the transfer instruction. Keep broker and charity confirmations.

Q: If the stock has declined, is it better to sell and donate cash? A: If a security has decreased in value, you may be better off selling the shares to realize a capital loss and donating cash proceeds, because you can use the realized loss to offset gains (subject to tax rules) while donating cash yields a full deduction for the cash amount.

Q: Are donations to donor-advised funds tax deductible? A: Yes, donations to DAFs are generally deductible when contributed, subject to the usual limitations. Donors give up legal control, but retain advisory privileges.

Q: How soon should I get a qualified appraisal? A: For nonpublic gifts above IRS thresholds, obtain a qualified appraisal before filing your tax return and follow Form 8283 instructions. Appraiser timing and format requirements are strict.

See also

• Charitable contribution (U.S. taxation)
• Form 8283 (Noncash Charitable Contributions)
• Donor-advised fund
• Capital gains tax
• Valuation of donated property

References and further reading

• IRS Publication 526, Charitable Contributions (as of June 2024).
• IRS Form 8283 instructions (use for noncash contributions and appraisal rules).
• Fidelity Charitable guidance on donating appreciated stock (as of June 2024).
• Donor-advised fund resources such as DAFgiving360 and major private bank guides on charitable strategies (as of June 2024).

As of June 2024, according to IRS Publication 526 and major charitable giving sponsors, donating long-term appreciated publicly traded securities to qualified charities or donor-advised funds remains one of the most tax-efficient ways to support charity while minimizing capital gains tax.

Practical next steps

• Confirm charity acceptance and obtain transfer instructions.
• Review your holding period and basis documents.
• Coordinate with your broker to transfer shares and get transfer confirmations.
• Obtain contemporaneous written acknowledgment from the charity and complete Form 8283 if required.
• Consult a tax advisor for large, complex, or closely held stock gifts.

Explore how Bitget Wallet can help you manage digital assets and coordinate transfers if you’re working with tokenized securities or related custody options. For more guidance on charitable gifting strategies and account features that simplify stock donations, consider contacting your tax advisor and the charity’s gift processing team.

Reporting note

• This article references authoritative guidance current as of June 2024. Tax rules and thresholds can change; verify current IRS publications and consult a tax professional for specific advice.

Final encouragement

If your question is “are stock donations tax deductible,” the short takeaway is: yes—especially for long-term appreciated publicly traded stock donated to qualified public charities or donor-advised funds—but the details matter. Confirm donee eligibility, holding period, valuation and documentation, and consult a tax advisor. To explore secure custody and transfer options, consider Bitget Wallet and Bitget account services for digital asset management and streamlined transfers.