Donate Cash or Appreciated Stock: Why Can Stock Be More Tax Efficient?
Compare both the charitable deduction and the tax cost of disposing of an appreciated asset.
Cash approach
If a taxpayer sells appreciated stock first, the sale can create taxable gain before the cash is donated.
Direct-property approach
Contributing appreciated property directly to a qualifying charity can potentially avoid recognition of built-in gain and produce favorable deduction treatment under qualifying circumstances.
Not every donation is the same
Holding period, property type, recipient organization, use of property, AGI limitations, and other requirements affect the result.
Planning factors
Consider tax character, liquidity, concentration risk, charitable goals, and current deduction limitations.
The takeaway
Good charitable planning compares deduction value with the tax cost of selling the asset.
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FAQ
Is appreciated stock always better than cash?
No.
Can donating appreciated property avoid capital gain recognition?
Potentially, under qualifying circumstances.
Do percentage limitations still apply?
Yes.