Donating Appreciated Securities: Tax and Timing Checklist

Quick overview

Donating appreciated securities is a common, tax-efficient way to support charities. When you transfer long-term appreciated stock, bond, or mutual fund shares directly to a qualified public charity, you typically avoid paying capital gains tax on the built-in gain and may claim a charitable deduction for the securities’ fair market value (FMV) on the date of the gift. This can stretch the dollar of your gift and reduce your taxable income, but the strategy has clear limits, paperwork requirements, and timing considerations.

In my 15 years as a financial planner, I’ve seen donors increase charitable impact and reduce tax bills by giving stock shares instead of selling and donating cash. That said, mistakes in valuation, timing, or reporting can blunt the benefit. Below is a practical checklist and guide to help you plan a secure, IRS-compliant gift.

Key tax rules to know (current as of 2025)

• Holding period: To claim the FMV deduction, securities must be long-term (held more than 1 year) at the time of the gift. Short-term holdings generally mean you can deduct only your cost basis, not FMV. (IRS: Publication 561 and Charitable Contributions page)
• Deduction limits: If you donate long-term appreciated securities to a public charity and claim FMV, the deduction is generally limited to 30% of your adjusted gross income (AGI). If you instead elect to deduct the property’s cost basis, the deduction is subject to higher AGI limits (typically 50% for gifts to public charities). Gifts to certain private foundations or other non-public charities have lower percentage limits (commonly 20% for FMV). Excess amounts can be carried forward for up to five years. (IRS — Charitable Contributions)
• Capital gains tax avoided: By gifting the shares directly, you do not recognize the capital gain that would occur on a sale, so you avoid the associated federal capital gains tax (and often state tax). That makes an FMV deduction powerful when the asset has appreciated substantially.
• Reporting: Noncash gifts require additional IRS reporting. Complete Form 8283 if the deduction for any noncash contribution is more than $500. If a single item (or group of similar items) is valued over $5,000, rules about appraisals and Form 8283 Section B may apply—though publicly traded securities are generally excepted from the qualified appraisal requirement. Always follow Form 8283 instructions and IRS guidance. (IRS — About Form 8283)
• Valuation: For publicly traded securities, the FMV is typically the average of the high and low quoted price on the gift date (or the closing price, depending on the brokerage/charity). Record the method and source. (IRS guidance and Publication 561)

Step-by-step timing & tax checklist (practical)

1. Confirm the charity’s acceptance process and brokerage details.

• Not every nonprofit accepts securities; call the charity’s development office and get their brokerage firm and DTC instructions in writing. Some charities prefer donations through a donor-advised fund (DAF) or their broker.

1. Decide the gift date and target tax year.

• To count in a tax year, the gift must be transferred (control given to the charity) by December 31. For electronic transfers, the gift date is typically the date the shares are delivered to the charity’s account. Start transfers several business days before year-end to avoid settlement delays.

1. Choose which securities to give.

• Prioritize long-term holdings with large unrealized gains. Stocks with low basis produce the largest tax advantage. Avoid gifting short-term holdings if your goal is the FMV deduction.

1. Instruct your broker or transfer agent precisely.

• Provide the charity’s brokerage name, account number, DTC number, and receiving broker contact. If delivering a certificate, get endorsed instructions. Mistakes here cause delays and can shift the gift into the next tax year.

1. Track the transaction closely and get confirmation.

• Keep trade confirmations, transfer receipts, and the charity’s written acknowledgment showing the date and description of the gift. These are required for your tax file.

1. Handle IRS reporting.

• If the donation value exceeds $500, complete Form 8283 and attach it to your return. If a single donated asset exceeds $5,000 and isn’t publicly traded, secure a qualified appraisal and follow 8283 instructions. Publicly traded stock is typically easier to report but still requires Form 8283 if over $500.

1. Decide FMV vs. basis election if applicable.

• If you donated to a public charity and want the FMV deduction, ensure you meet the holding period and AGI limits. If you can’t use the FMV deduction because of AGI limits, you may consider electing to take the basis instead (which has different limits). Work with your tax advisor to choose the better election for your situation.

Real-world example (simplified)

You bought stock for $5,000 ten years ago; it’s now worth $25,000. If you sold the shares and donated the cash, you’d owe capital gains tax on $20,000 of gain (federal rate depends on your tax bracket and net investment income tax). By donating the shares directly to a public charity, you:

• Avoid tax on the $20,000 appreciation, and
• May claim a $25,000 deduction (subject to AGI limits).
  Assuming a 15% long-term capital gains rate, the avoided tax is roughly $3,000. Combined with the charitable deduction, your net tax benefit may substantially increase the after-tax value of the gift.

Common pitfalls and how to avoid them

• Late transfer: Waiting until Dec 31 with poor transfer instructions can push the gift into the next year. Start the process early.
• Lack of documentation: The IRS requires contemporaneous written acknowledgement from the charity for gifts over $250. Keep broker confirmations and the charity’s letter together.
• Wrong valuation method: For publicly traded securities, note the correct day’s price method. If you use a different valuation approach, keep documentation explaining it.
• Donating from a retirement account: Securities in an IRA aren’t donated the same way. For IRAs, consider a qualified charitable distribution (QCD) up to $100,000 (checks with your custodian) for RMDs; QCDs are not an itemized deduction but do exclude the distribution from taxable income. Speak with your custodian or tax advisor for precise handling.

Special strategies

• Donor-Advised Funds (DAFs): Donor-advised funds accept appreciated securities, allow you to take a deduction in the year of the gift, and let you recommend grants to charities over time. This is helpful if you want the tax deduction now but prefer to pace charitable gifts.
• Bunching: If you itemize in one year and take the standard deduction in another, consider bunching several years of securities gifts into a single year to exceed the standard deduction threshold and maximize tax benefit.
• Gifts of closely held stock or startup shares: These require careful valuation and charity acceptance. See our article on Charitable Giving for Entrepreneurs: Donating Equity and Startup Shares for specifics.

Documentation and recordkeeping (what to keep)

• Charity acknowledgment letter (required for any deduction over $250) showing date and description of the securities. The letter must state whether the charity provided goods or services in return.
• Broker transfer confirmations showing date and number of shares transferred.
• Form 8283 (noncash) completed and attached to your return when required.
• Basis records showing your cost and purchase date.
• Valuation source (brokerage price sheet, exchange price, or other market data) proving FMV on the gift date.
  For more on valuing noncash gifts and appraisal rules, see Valuing Noncash Charitable Gifts: Reporting and Appraisal Basics.

When to get professional help

• Large gifts (six or seven figures): Engage a CPA or tax attorney up front to model AGI limits, state tax consequences, and carryover rules.
• Gifts of non-publicly traded assets: These require appraisals and special reporting.
• Complex estate and philanthropic plans: Coordinate securities gifts with trusts, bequests, or family giving strategies. Our guide on Tax-Efficient Charitable Giving Strategies covers coordinated approaches for high-net-worth donors.

Authoritative resources

• IRS, Charitable Contributions: https://www.irs.gov/charities-non-profits/charitable-contributions
• IRS, About Form 8283 (Noncash Charitable Contributions): https://www.irs.gov/forms-pubs/about-form-8283
• IRS Publication 561, Determining the Value of Donated Property: https://www.irs.gov/publications/p561

Professional disclaimer

This article is educational only and not personalized tax or legal advice. Rules about charitable deductions, holding periods, AGI limits, and reporting can be complex and change. Consult a CPA or tax attorney before executing large or complicated gifts.

Final checklist (one-page)

• Confirm charity acceptance and get transfer instructions in writing.
• Confirm shares are long-term (>1 year) if you plan to deduct FMV.
• Transfer shares well before Dec 31 for year-of-deduction treatment.
• Save broker confirmations and the charity’s acknowledgment letter.
• Complete and attach Form 8283 when required.
• Calculate AGI limits and plan carryover if deduction exceeds limits.
• Consider DAFs or QCDs if they better match your timing or tax needs.

Donating appreciated securities can be one of the most tax-efficient ways to give. With simple advance planning and correct documentation, you can increase the impact of your gift while staying compliant with IRS rules.