Donating Appreciated Stock and Donor-Advised Funds: How to Give Shares Instead of Cash Under the 2026 Rules

Most people who give to charity do it with a credit card or a check. For anyone holding stock that has gone up, that is the most expensive way to give. A share bought for $10 and now worth $100 carries $90 of gain that the IRS taxes at up to 23.8% federally when you sell. Give the share itself to a charity that has held it for more than a year and that tax is never paid: you deduct the full $100, and the charity, which is tax-exempt, sells it for $100. For executives and early employees whose largest asset is one low-basis position, this is one of the few ways to reduce a concentrated holding without a tax bill. The tax-efficient investing framework covers where giving fits among the other levers.

The rules changed for gifts made from January 1, 2026. The 2025 budget law (Public Law 119-21) added a floor of 0.5% of adjusted gross income before charitable gifts count, capped the benefit of itemized deductions at 35 cents per dollar for the 37% bracket, and gave non-itemizers a new deduction for cash gifts. None of that removes the case for giving shares. It changes how to size and time the gifts.

Why is donating appreciated stock better than selling it and giving cash?

Donating appreciated stock is better because you get the same deduction you would get for cash, and the capital gains tax on the growth disappears. If you sell first, you pay the gains tax and give what is left. If you give the shares, the charity receives the full value and pays nothing when it sells.

The mechanism is in the definition of the deduction. Publication 526 says that for capital gain property, meaning a capital asset you would have sold for a long-term gain, “you can generally use the FMV of the property” as your deduction. Fair market value for listed shares is set by Publication 561 as the average of the highest and lowest quoted selling prices on the date of the gift. Your cost basis drops out of the calculation entirely: a share with a $10 basis and a share with a $95 basis both produce a $100 deduction.

That gives three rules for which shares to give:

• Give the lots with the largest gain. Every dollar of built-in gain you give away is a dollar you never pay tax on. Your broker’s specific-lot instructions let you choose which lots move.
• Never give a stock that is down. If the value is below your basis, the deduction is limited to the lower value and the loss is gone. Sell it, keep the capital loss to offset other gains, and give the cash.
• Replace the shares if you still want the exposure. If you like the stock, give the low-basis shares and buy the same number back with the cash you would have donated. You hold the same position with a basis reset to today’s price. Wash-sale rules apply only to losses, so they do not block this.

How much tax does giving shares instead of cash actually save?

On a large, low-basis gift, giving the shares directly typically saves the full capital gains tax on the gain plus a larger deduction, because the charity receives the pre-tax value. Chart 1 runs the comparison for $100,000 of stock bought for $10,000, given by a top-bracket donor under the 2026 rules.

Selling first costs $21,420 in federal gains tax at 23.8%, so only $78,580 reaches the charity, and the deduction is smaller because the gift is smaller. Giving the shares sends the full $100,000 and produces a $95,000 deduction after the new floor, worth $33,250 at the 35% effective rate. The rates come from IRS Topic 409 and the 3.8% net investment income tax; the guide to taxes on sold stock walks through both.

Read the last two rows together. Giving the shares costs you $7,497 less and the charity gets $21,420 more. The saving grows with the size of the gain: on shares with a near-zero basis, nearly a quarter of the gift would otherwise go to federal tax, before state tax. In states that tax capital gains as ordinary income, such as California, the gap is wider still.

Does the one-year holding period matter when you donate stock?

Yes. Shares held one year or less are deductible only at your cost basis, not their market value, because a sale would have produced short-term gain. Publication 526 gives the example directly: stock held five months, bought for $800 and worth $1,000, yields an $800 deduction.

The holding period trips up equity-compensation holders in three predictable ways:

• RSUs. The clock starts at vesting, when the shares were taxed as wages, not at grant. Shares from a vest eleven months ago are still short-term, and their basis is the value at vest, so the deduction is roughly what you already paid tax on.
• ISOs. Giving ISO shares to charity counts as a “disposition” under 26 U.S.C. §424(c), which expressly includes gifts. Give them before you meet the ISO holding periods and you trigger a disqualifying disposition, with ordinary income on the bargain element. The rules are in our ISO vs NSO guide.
• Hedged shares. If you put a collar or another offsetting position on shares before they went long-term, the straddle rules under §1092 restart the holding period, which does not begin until the offsetting position is closed (Treas. Reg. §1.1092(b)-2T). Check the holding period of collared lots before you give them.

Timing matters too. A gift is complete when the shares land in the charity’s account, not when you send the instruction. Publication 526 notes that a certificate you give your own agent for transfer is not delivered until the transfer is recorded on the company’s books. In practice, start broker-to-broker transfers by early December for a gift that must count this year.

How much can you deduct: the 30%, 20% and 60% AGI limits?

You can deduct gifts of long-held stock to a public charity or donor-advised fund up to 30% of your adjusted gross income each year, and to most private foundations up to 20%. Anything above the ceiling carries forward for five years. Cash gets more room: 60% of AGI to public charities and 30% to private foundations.

The ceilings come from 26 U.S.C. §170(b)(1). Each applies to a different kind of gift, and they stack in a set order:

Three details matter for large gifts:

• The basis election. Under §170(b)(1)(C)(iii) you can deduct long-held stock at basis in exchange for the 50% ceiling. That only makes sense when the gain is small and you want the deduction this year rather than spread over carryforward years.
• The carryforward is real money with a deadline. In Chart 2’s example, a $500,000 gift on $1,000,000 of AGI produces about $295,000 of deduction this year and about $205,000 carried forward. Each later year it counts after that year’s own gifts, oldest first, and anything unused after five years is lost. If your income will fall, for example after you leave a job, size the gift so the carryforward can be used.
• The 0.5% floor is not lost when you exceed a ceiling. Under the new §170(d)(1)(C), the floored amount is added to the carryforward in years when a ceiling is exceeded. In years when it is not, it is simply gone.

What changed for charitable deductions in 2026?

For tax years beginning after December 31, 2025, itemizers lose the first 0.5% of AGI of their giving, top-bracket donors get at most 35 cents of benefit per dollar, and non-itemizers gain a deduction of up to $1,000 ($2,000 joint) for cash gifts. The 60% ceiling for cash, which was due to expire after 2025, is now permanent.

The floor works like a deductible. On $1,000,000 of AGI, the first $5,000 of gifts each year earns nothing. Someone who gives $8,000 a year in small checks gets a deduction for $3,000 of it. Someone who gives $40,000 every fifth year in one block loses the $5,000 only once. The statute applies the floor to the least-favored gifts first: 20%-limit property first, then 30%-limit property such as long-held stock, and cash to public charities last.

The §68 haircut applies to taxpayers whose income reaches the 37% bracket, which starts at $640,600 single and $768,700 joint for 2026. It reduces itemized deductions by 2/37 of the smaller of your itemized deductions or the amount by which taxable income plus itemized deductions exceeds the 37% threshold. For a donor well inside the top bracket, each deducted dollar is worth 37% × 35/37 = 35 cents. That is why 2025 was a good year to accelerate large gifts. For 2026 and later it is a modest cost, and it does not touch the capital gains tax you avoid by giving shares, which is often the larger part of the benefit.

What is a donor-advised fund, and when does it beat giving directly or a private foundation?

A donor-advised fund is an account at a sponsoring public charity: you get the deduction when you contribute, and recommend grants to other charities later. The IRS describes it as a separately identified fund in which the sponsor has legal control once you contribute, while you keep advisory privileges over distributions and investments.

For a holder of appreciated stock, the DAF separates two decisions that otherwise have to happen together. The tax decision (which year to take the deduction, which lots to give) happens when you transfer shares. The giving decision (which charities, how much, when) can happen over years. The sponsor sells the shares tax-free, and the proceeds can be invested and grow without tax until granted out.

Chart 3 shows why the DAF has become the default vehicle. It gets the same 30% and 60% ceilings as a direct gift, while a private foundation gets 20% and 30% and deducts private-company stock only at basis. A foundation gives you full control, a family board and a legacy, but it files a public Form 990-PF, pays excise tax on investment income, and must distribute roughly 5% of its assets each year under §4942. DAFs have no legal payout minimum, though sponsors set their own activity policies.

The trade-offs are real. A DAF contribution is irrevocable: you cannot get the money back, and grants cannot buy anything that benefits you, such as event tickets or dinner seats. To deduct the contribution, you need a contemporaneous written acknowledgment from the sponsor stating that it has exclusive legal control over the assets (Publication 526). Most sponsors issue it automatically, but keep it.

How does bunching gifts into a DAF beat the standard deduction?

Bunching works by putting several years of giving into one tax year so your itemized deductions clear the standard deduction, then taking the standard deduction in the years between. With a 2026 joint standard deduction of $32,200, many households that give steadily get no tax benefit from those gifts.

Chart 4 takes a married couple with $400,000 of AGI who give $20,000 a year and have $12,000 of other itemized deductions. Each year their itemized total, after the $2,000 floor, is $30,000, which is below the standard deduction. Their gifts produce no tax benefit beyond the new $2,000 non-itemizer deduction. If they instead move $80,000 of appreciated stock into a DAF in year one and grant $20,000 a year from it, they itemize $90,000 once and take the standard deduction three times. Over four years they deduct $49,800 more, about $11,950 of federal tax at 24%, and they avoid the gains tax on $80,000 of stock as well. The charities receive the same $20,000 a year.

Bunching works best when it lines up with a high-income year: a large RSU vest, a liquidity event, a year you exercise NSOs, or the year you sell part of a concentrated position. A deduction is worth more against 37%-bracket income than 24%-bracket income, so the DAF lets you move the deduction into the year it is worth most. If the high-income year comes from startup stock that qualifies for QSBS, check first: gain that Section 1202 already excludes does not need a deduction to offset it.

1. Estimate this year’s AGI and your 30% ceiling for stock gifts.
2. Add up the giving you plan for the next three to five years. That is your bunch.
3. Pick the highest-gain lots held more than a year to cover it.
4. Transfer them to the DAF before mid-December, and grant on your normal schedule afterwards.

What paperwork do you need: Form 8283, acknowledgments and appraisals?

For listed shares the paperwork is light: a written acknowledgment from the charity for any gift of $250 or more, and Form 8283 Section A when your noncash gifts exceed $500. Publicly traded securities are exempt from the qualified-appraisal rule at any size. Privately held stock is not.

The Form 8283 instructions say that for “donations of publicly traded securities in any amount, you should only use Section A.” For private shares, all shares of the same company count as one item, so you cannot split a gift to stay under $5,000. The appraisal fee is not deductible as a charitable gift. If a ceiling pushes part of the deduction into later years, attach a copy of the original Form 8283 to each year’s return that claims the carryforward.

Founders and early employees should plan the appraisal early. Private shares often carry transfer restrictions and rights of first refusal, and many charities and DAF sponsors accept them only after their own review. Expect the process to take weeks, so start well before year-end.

How does giving stock fit a concentrated-position plan, collars and 10b5-1 sales?

Giving shares is the only way to shrink a low-basis position with no capital gains tax at all, so it belongs in the same plan as your staged sales and hedges. It will not solve concentration by itself. It handles the slice you were going to give away anyway.

The usual sequence for an executive or early employee with a large position has three parts:

• Sell on a schedule. A 10b5-1 plan sells a set number of shares each quarter, which lowers concentration and gives you the defense against insider-trading claims.
• Hedge what you keep. A collar puts a floor under the shares you are not yet ready to sell.
• Give the lowest-basis lots. Each year, move the lowest-basis lots into a DAF in the amount you would give anyway, sized to the 30% ceiling and timed to your high-income years.

Over a few years, the shares you give are the ones that would have carried the most tax, and your remaining position has a higher average basis. The next sale or diversification step, including a move into direct indexing, then costs less tax.

Insiders face additional rules. A gift is not a sale, but the SEC’s 2022 amendments moved bona fide gifts by officers and directors from Form 5 to Form 4, so gifts are now reported promptly and in public. Many company policies treat gifts like trades: pre-clearance, blackout windows, and no gifts while you hold material nonpublic information, because a charity that sells right after a gift could look like a sale made on inside information. Shares under a collar also need care. Giving shares that back an open short call can leave the option uncovered, so close or roll the hedge first, or give lots that are not hedged.

Measure the whole program against your balance sheet. The net worth essentials guide shows how to track what share of your liquid net worth sits in one stock. Giving, selling and hedging all aim to bring that share down.

What should you check before you give stock to charity?

Before any gift of shares, check the holding period, the gain on each lot, your AGI ceiling and your company’s gift policy. Then confirm that the charity or DAF can receive the transfer.

1. Pick lots held more than one year with the largest gain per dollar; exclude lots showing a loss.
2. Confirm the holding period for RSU, ISO, ESPP and hedged lots specifically.
3. Estimate AGI and check the gift fits the 30% ceiling, or plan for the carryforward.
4. Decide where it goes: direct to the charity, a DAF for later grants, or a foundation.
5. Clear it with your company if you are an insider: pre-clearance, window, Form 4.
6. Get the receiving account details (DTC number, account number, your name or fund ID as reference) and tell the charity the gift is coming.
7. Transfer by early December for a gift that must count this year, and record the date the shares arrive.
8. Keep the acknowledgment, then file Form 8283 with the return and track any carryforward.

Frequently asked questions

Key takeaways

1. Giving shares held more than one year beats selling and giving cash: you deduct full market value and the capital gains tax on the growth, up to 23.8% federally, is never paid.
2. Give your highest-gain lots and keep your losers to sell for the loss; shares held one year or less are deductible only at basis.
3. Long-held stock to a public charity or DAF is deductible up to 30% of AGI a year (20% to most private foundations), with a five-year carryforward for the excess.
4. From 2026 the first 0.5% of AGI of giving is not deductible, and top-bracket donors get at most 35 cents of benefit per dollar, so larger, less frequent gifts work better than many small ones.
5. A donor-advised fund lets you take the deduction in a high-income year and grant the money out over many years, which is what makes bunching work.
6. Publicly traded shares need no appraisal, but you need Form 8283 above $500 and a written acknowledgment for gifts of $250 or more; a DAF acknowledgment must confirm the sponsor’s exclusive legal control.
7. For concentrated holders, gifts are a third exit alongside staged sales and hedges; insiders must pre-clear gifts and report them on Form 4.

Sources and method

1. IRS Publication 526 (2025), Charitable Contributions — capital gain property, AGI limits, carryovers, donor-advised fund acknowledgments, timing of stock gifts
2. 26 U.S. Code § 170, Charitable contributions and gifts — 30%/20%/60% ceilings, 0.5% floor (§170(b)(1)(I)), carryforwards, qualified appreciated stock, appraisal thresholds, non-itemizer deduction (§170(p))
3. 26 U.S. Code § 68, Overall limitation on itemized deductions — 2/37 reduction for taxpayers in the 37% bracket from 2026
4. IRS Instructions for Form 8283 (12/2025), Noncash Charitable Contributions — Section A vs Section B, publicly traded securities, $500,000 appraisal attachment
5. IRS Publication 561 (12/2025), Determining the Value of Donated Property — fair market value of listed stock: average of the high and low on the valuation date
6. IRS, Tax inflation adjustments for tax year 2026 — 2026 standard deduction and bracket thresholds

Statutory figures are federal rules for tax years beginning in 2026, checked against the text of 26 U.S.C. §170 and §68 as amended by Public Law 119-21 (July 4, 2025), IRS Publication 526 (2025), the Form 8283 instructions (12/2025) and the IRS 2026 inflation adjustments. Publication 526 for 2026 had not been released when this was written, so 2026 changes are cited to the statute. Charts 1 and 4 and every worked example are illustrative Proflex calculations with the inputs stated in each note; they ignore state tax, the alternative minimum tax and other itemized deductions unless stated. Chart 3 is a qualitative assessment. This is education, not tax or legal advice; confirm with your CPA/counsel.