Donating appreciated assets — publicly traded stock, mutual funds, or real estate — can be more tax-efficient than donating an equivalent amount of cash. You avoid the capital-gains tax on the appreciation, and the full value goes to the nonprofit.
How it works
You instruct your broker to transfer shares (or other assets) directly to the nonprofit’s brokerage account. The nonprofit then sells the shares — and because they’re tax-exempt, they pay no tax on the sale. You typically deduct the fair market value of the shares on the date of transfer.
For real estate or other illiquid assets, the process is more involved (often requiring an appraisal and the nonprofit’s acceptance of the asset), but the same principle applies.
Why donors choose this option
Two tax benefits in one. If you sell appreciated stock yourself and then donate the cash, you owe capital-gains tax on the appreciation — reducing the value of your gift. If you donate the stock directly, you skip the capital-gains tax entirely, and (if you itemize) deduct the full fair-market value.
It’s also a way to rebalance a portfolio without a tax hit — if a position has grown to be a larger share of your holdings than you’d like, donating those shares is one way to trim it.
Tax considerations
For the deduction to equal the fair market value, you generally need to have held the asset for more than a year (long-term capital-gain property). Short-term assets get less favorable treatment.
Most nonprofits readily accept publicly traded securities. Real estate gifts are case-by-case — nonprofits sometimes decline real estate they can’t easily sell or that comes with liabilities (environmental issues, mortgages, etc.).
Getting started
Ask the nonprofit for their brokerage information (DTC number, account number, and any specific transfer instructions). Most have a one-page document for this.
Instruct your broker to transfer the shares. Notify the nonprofit when you initiate the transfer so they can watch for it and send a proper acknowledgment.
