Donating appreciated stock is an effective strategy to give back to your favorite charity while also enjoying significant tax benefits. In 2025, many individuals are turning to this method as a way to make their charitable contributions go further. By donating appreciated stock, you can avoid paying capital gains taxes and receive a charitable deduction, which makes this option a win-win for both you and the charity. In this article, we’ll walk you through the process of donating appreciated stock, highlight the benefits, and explain how it works in simple terms.
What Is Appreciated Stock?
Before exploring the benefits of donating appreciated stock, it’s essential to understand what it is. Appreciated stock refers to stocks that have increased in value since you first purchased them. For example, if you bought shares for $50 each and now those shares are worth $100 each, the stock has appreciated by $50 per share.
If you were to sell this stock, you would be required to pay taxes on the gain. However, if you donate the appreciated stock directly to a charity, you avoid paying those taxes, and you can also claim a charitable deduction. This is what makes donating appreciated stock a smart choice for charitable giving.
Why Donate Appreciated Stock in 2025?
In 2025, donating appreciated stock has become an increasingly popular choice for many people. Here are some of the key reasons why:
- Avoid Capital Gains Tax – When you sell appreciated stock, you typically have to pay taxes on the gain. But if you donate appreciated stock instead of selling it, you avoid the capital gains tax. This can save you a significant amount of money, especially if the stock has appreciated over a long period.
- Claim a Charitable Deduction – Donating appreciated stock allows you to claim a deduction for the full market value of the stock at the time of the donation. This can reduce your taxable income, resulting in lower taxes.
- Give More to Charity – By donating appreciated stock, you can give more to the charity of your choice. Since you don’t have to pay taxes on the capital gains, you’re able to donate the full value of the stock to the charity.
- Flexibility in Donations – Donating appreciated stock allows you to contribute to a wide range of charities, from large nonprofit organizations to smaller local groups. The flexibility of this type of donation makes it an appealing option for many people.
How to Donate Appreciated Stock
Donating appreciated stock is a simple process, but there are a few steps you need to follow to ensure everything goes smoothly:
Step 1: Choose a Qualified Charity
The first step is to find a qualified charity that is eligible to receive donations of appreciated stock. Most 501(c)(3) organizations, such as universities, hospitals, and foundations, are eligible. However, it’s a good idea to confirm with the charity that they accept donations of stock before proceeding.
Step 2: Select the Stock You Want to Donate
Next, choose which stocks you’d like to donate. These should be stocks that have increased in value since you purchased them. The higher the appreciation, the greater the potential tax benefits.
Step 3: Contact the Charity
Before transferring the stock, reach out to the charity to ensure they are ready to accept the donation. Most charities have a specific process for accepting stock donations, and they will provide you with the necessary details, such as an account number and instructions for transferring the stock.
Step 4: Transfer the Stock
You will need to contact your brokerage firm to transfer the appreciated stock to the charity’s brokerage account. Your broker will guide you through the process, which may involve filling out forms or providing specific instructions.
Step 5: Receive a Tax Receipt
After the stock donation is processed, the charity should send you a receipt for your donation. This receipt is important for claiming your charitable deduction when filing your taxes.
The Tax Benefits of Donating Appreciated Stock
There are two major tax benefits when you donate appreciated stock:
- No Capital Gains Tax – By donating appreciated stock, you avoid paying capital gains tax on the increase in value. This is one of the most significant benefits of donating stock instead of selling it.
- Charitable Deduction – When you donate appreciated stock, you can deduct the full fair market value of the stock at the time of the donation from your taxable income. This can result in lower taxes. For donations of appreciated assets, you can generally deduct up to 30% of your adjusted gross income (AGI). If your donation exceeds this limit, you can carry the deduction forward for up to five years.
Things to Consider When Donating Appreciated Stock
Although donating appreciated stock is a great way to save on taxes and support your favorite charities, there are a few important things to keep in mind:
- Holding Period – To receive the full tax benefits, the stock must be held for at least one year. If you sell the stock within one year of purchasing it, the gains are considered short-term, which may subject them to a higher tax rate.
- Limits on Deductions – While you can deduct up to 30% of your AGI for donations of appreciated stock, if your total donation exceeds that amount, you can carry the excess forward to future tax years.
- Qualified Charities – In order to receive the tax benefits, the charity must be a qualified 501(c)(3) organization. Be sure to confirm this before making your donation.
- Correct Transfer Process – The process for transferring appreciated stock must be done correctly to ensure you receive the full tax benefits. Be sure to work with your financial advisor and broker to ensure everything is done properly.
Conclusion: Donate Appreciated Stock and Make a Greater Impact in 2025
As we move into 2025, donating appreciated stock continues to be an excellent way to make a meaningful impact while benefiting from tax advantages. Donating appreciated stock allows you to avoid paying capital gains tax and provides a charitable deduction based on the stock’s current value, which means you can give more to your chosen charity.
If you have appreciated stocks in your portfolio, consider donating them in 2025. Not only will you be able to make a bigger contribution to the causes you care about, but you’ll also save on taxes. Work with your financial advisor to ensure you’re making the most of your donation, and remember, donating appreciated stock is an easy and effective way to support charitable organizations while retaining more of your own assets.
