Key Takeaways
- Gifting appreciated stock beats gifting cash: full-value deduction plus the capital gain disappears.
- Donor-advised funds let you bunch deductions into high-income years while granting steadily.
- Over 70½, qualified charitable distributions from an IRA are often the single most efficient giving channel.
The same generosity can cost very different amounts after tax. A $20,000 cash gift, a $20,000 gift of appreciated stock, and a $20,000 qualified charitable distribution from an IRA all deliver $20,000 to the charity, but the after-tax cost to you can differ by thousands of dollars depending on which channel you choose and when.
Since charity is the rare place where tax planning and joy point the same direction, it is worth getting the mechanics right.
Appreciated Stock First, Cash Last
Donating long-term appreciated securities to a public charity gives you a deduction for full market value while the embedded capital gain is never taxed by anyone. If you love the stock, immediately rebuy it with the cash you would have donated; you end up with the same position at a higher basis. Cash should be your giving channel of last resort whenever your taxable portfolio holds meaningful gains, including concentrated employer stock covered in our concentration guide.
Donor-advised Funds and Bunching
A donor-advised fund (DAF) separates the tax event from the giving: contribute a lump of cash or stock, deduct it all this year, then recommend grants to charities over years. That makes DAFs the natural vehicle for bunching, stacking several years of gifts into a high-income year, and for windfall years: a business sale, a big vest, an unusually large bonus. Contributing appreciated stock to a DAF combines both advantages in one move.
Deduction limits apply, generally up to 30% of adjusted gross income for appreciated-asset gifts to public charities, with a five-year carryforward for the excess.
Try it: the free The Wealth Checkup takes a couple of minutes and shows you where you stand. Or explore tax planning at Attend.
QCDs After 70½
From age 70½, you can send money directly from an IRA to charity as a qualified charitable distribution, up to an inflation-indexed annual limit (over $100,000). The distribution never appears in your income, which beats a deduction: it helps even if you take the standard deduction, and it holds down income-linked costs like Medicare premiums. From RMD age, QCDs also count toward the required distribution, making them the default giving channel for charitable retirees.
Bigger Structures, Briefly
Substantial and sustained giving may justify heavier machinery: charitable remainder trusts that convert appreciated assets into lifetime income with an upfront deduction, charitable lead trusts that pass assets to heirs at reduced transfer cost, or naming a DAF or charity as beneficiary of pre-tax retirement accounts, the most heavily taxed asset an heir can receive and the cheapest one to give away.
We coordinate these with clients' estate plans inside estate and legacy planning; the deduction is nice, but the coherent plan is the point.
Frequently Asked Questions
Is it worth donating stock for small gifts?
Transfer friction makes stock gifts most practical above a few thousand dollars, or through a donor-advised fund that handles the mechanics once for many grants.
Can I donate stock I have held under a year?
You can, but the deduction is limited to your cost basis rather than market value, so short-term holdings are usually the wrong asset to give.
Do QCDs work from a 401(k)?
No, only from IRAs. Retirees often roll a 401(k) to an IRA partly to unlock QCD giving.
Tony leads Attend Wealth, a fee-based wealth management firm in Atlanta serving professionals, families, and business owners. Advisory services are held to a fiduciary standard. More about Attend
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