When You Give to Charity, Donating Stock Beats Writing a Check
She's a senior director of product at a large public tech company. Eight years in. Her RSUs have stacked into about $2.4 million of one stock. Every year she gives $20,000 to charity — her alma mater, a local food bank, a conservation group she's supported since grad school. She writes a check from her salary, takes the deduction, and moves on. It feels clean. It feels right. And it misses the point entirely.
Here's the strategy: donating appreciated shares directly to a charity sidesteps the capital gains tax you'd pay if you sold the stock, while still giving you a full fair-market-value charitable deduction. No one told her because most preparers file returns, they don't design giving strategies.
The Giving Gap
The instinct to give cash is understandable. It's simple. You write a check or swipe a card, you get a receipt, your CPA plugs it into Schedule A. Done.
But if your net worth has concentrated into a single employer stock through years of RSU vesting, the simple move is probably the expensive one. You're holding an asset that has appreciated significantly since the shares hit your account. That appreciation carries an embedded capital gains liability. When you give cash instead of shares, you leave that liability sitting there — a future tax bill you'll have to deal with when you finally sell.
The better move is to give the shares and let the charity deal with the sale.
How Donating Shares Changes the Math
The mechanics are straightforward. Instead of writing a check, you transfer shares of appreciated stock directly to the charity. The charity sells the shares. Because the charity is tax-exempt, it pays no capital gains tax. You get a charitable deduction for the full fair market value of the shares on the date of transfer.
There are two limits to know. You can deduct up to 30% of your adjusted gross income for donations of appreciated long-term capital gain property to public charities (the normal cash-donation limit is 60%). Any excess carries forward for up to five years.
In a representative situation: If our senior director gives $20,000 in appreciated shares instead of cash, she avoids capital gains tax on roughly $12,000 of embedded appreciation. At the top long-term capital gains rate plus the 3.8% net investment income tax, that's roughly $3,000 saved on the gains alone. And she still gets the full $20,000 itemized deduction.
Two Benefits at Once
This is the part most people miss. A charitable donation of appreciated stock produces two separate tax benefits:
You avoid the capital gains tax you would have paid if you sold the shares and donated the proceeds. The gain is simply never recognized.
You claim a full fair-market-value deduction for the donation, up to the 30% AGI limit.
Compare that to selling the shares, paying the tax, and donating cash. In that scenario, you lose roughly 28% to 33% of the appreciation to federal and state taxes before the charity gets anything. Donating the shares directly eliminates that leakage.
The numbers work best with shares held longer than one year. Shares held a year or less (short-term) get a deduction limited to your cost basis, not the full market value. For most RSU holders whose shares vest and then sit, the holding period clock starts at vesting. If you've been holding a grant from 2021, you're well past the one-year mark.
Why This Fits the Concentrated-Stock Position
This goes beyond tax efficiency. For the tech executive with most of their net worth in one ticker, charitable giving with appreciated shares is also a diversification tool.
You can read more about the broader approach in our post on multi-year RSU diversification plans. The short version: every share you move out of the concentrated position into charity (or into a diversified portfolio) reduces the single-stock risk. Donating shares accelerates that process without triggering a taxable event.
If you're already giving $15,000, $25,000, or $50,000 a year to charity, routing those gifts through appreciated stock rather than your checking account turns a routine expense into a strategic move. The charity gets the same money. You reduce your concentrated position. And you capture a tax benefit you weren't getting before.
The Donor Advised Fund as a Bridge
One complication: not every charity can accept stock transfers. Small nonprofits, religious organizations, and local charities often lack the brokerage account to receive and liquidate shares.
A Donor Advised Fund solves this. You contribute shares to the DAF, get the full charitable deduction in the year of the contribution, and recommend grants to your chosen charities over time. The DAF handles the sale of the shares, and the proceeds sit in a charitable account you direct. You can read more about how they work in our post on donor advised fund tax strategy.
This is especially useful if you want to make a larger donation in a high-income year — say, when a big RSU tranche vests and you want to offset the income. You contribute a block of shares to a DAF, take the deduction in that tax year, and distribute the money to charities over the next several years.
What to Watch For
A few rules matter:
Holding period. Shares must be held more than one year to qualify for the full fair-market-value deduction. Short-term shares get a deduction limited to your cost basis.
Qualified charities. Only donations to qualified 501(c)(3) public charities count for the 30% AGI limit. Donations to private foundations or donor advised funds have different rules. Your strategist can walk through the specifics.
Valuation. For publicly traded stock, the value is the average of the high and low prices on the date of the transfer. No formal appraisal is needed. For large blocks or illiquid shares, different rules apply.
Transfer logistics. Your company's stock plan administrator or broker can facilitate the transfer. Most large brokerages have a charitable giving desk that handles this regularly. Give yourself a week or two for the paperwork.
State taxes. California treats charitable deductions the same as federal, so the state deduction follows the same rules. If you've moved out of California but still hold shares with California-source appreciation, the state sourcing rules can get nuanced. That's where having a strategist matters.
Giving as Part of a Plan
The deeper point is this: charitable giving should not be a standalone decision you make in December and hand to your CPA in March. It should be part of a year-round strategy that accounts for your income, your concentrated position, your equity, and your goals.
If you're a senior tech executive with a seven-figure stock position and you've been writing checks to charity out of your salary, there's a good chance you're leaving money on the table. A 15-minute conversation can tell you whether donating shares this year makes sense for your situation.
Book a free 15-minute discovery call with Roadmap Tax. No pitch. No obligation. Just a clear-eyed look at whether your giving strategy is working as hard as it could be. Call (619) 280-2700 or email info@RoadmapTax.com.
FAQ
What is the tax benefit of donating appreciated stock instead of cash?
You avoid paying capital gains tax on the appreciation while still claiming a full fair-market-value charitable deduction. The charity sells the shares tax-free, so the gain is never recognized by anyone.
What is the holding period requirement for donating appreciated stock?
Shares must be held for more than one year to qualify for the full fair-market-value deduction. For RSUs, the holding period starts at vesting.
Can I donate RSU shares that just vested?
Shares that vested within the last year are considered short-term. You can still donate them, but the deduction is limited to your cost basis (the value at vesting), not the current market value.
What if my charity can't accept stock donations?
You can use a Donor Advised Fund as an intermediary. Donate shares to the DAF, take the deduction immediately, and recommend grants to your chosen charities over time.
Is there a limit on how much stock I can deduct?
Yes. Donations of appreciated long-term capital gain property to public charities are limited to 30% of your adjusted gross income. Excess amounts carry forward for up to five years.
Do I need a formal appraisal to value the donated shares?
For publicly traded stock, no. The value is the average of the high and low prices on the date of transfer. For large blocks or illiquid shares, a qualified appraisal may be required.
