One of the most tax-efficient ways to give is by donating appreciated assets, like stock or real estate. When you donate assets that have increased in value since you purchased them, you avoid paying capital gains tax on the appreciation.
If you itemize deductions, you can also claim the asset’s full fair market value as a charitable contribution. This makes donating appreciated assets significantly more efficient than giving cash, almost like receiving a double benefit since there is no capital gains tax and you can take a full-value deduction.
Here’s an example:
Imagine you purchased stock for $5,000, and over time it grows to $50,000. You plan to donate $50,000 to a charity you care about, so instead of giving cash, you donate the shares. You receive a deduction for the full $50,000 gift, and you avoid paying capital gains tax on the $45,000 appreciation. The charity can sell the shares tax-free, allowing your full gift to support their mission.
Donating highly appreciated assets allows you to maximize your impact without reducing the value of your portfolio due to taxes. It can also be a smart strategy for investors who want to rebalance a diversified portfolio while supporting meaningful causes.
Common assets you can donate include:
- Stocks and bonds
- Exchange-traded funds (ETFs)
- Real estate (full properties or fractional interests)
- Business interests
- Mineral rights
- Cryptocurrencies
How to donate appreciated assets:
To donate publicly traded stock, your financial adviser can help you initiate a transfer by providing the charity’s investment account number and their DTC number. It’s important to notify the organization ahead of time so they know to expect your gift and can issue the appropriate receipt. For non-traditional assets, like real estate, business interests, or crypto, reach out to the charity first to confirm they can accept the gift and complete any required steps. Often a Donor Advised Fund (DAF) can help to facilitate this type of gift when a charity is unable to do so. Donating business or real estate gifts require additional planning well in advance of your transaction. It is a good idea to connect with our team as well as your CPA and attorney(s) when you begin considering this type of gift.
