Gifts of Stock and Other Non-Cash Donations Explained

Quick overview

Donating stocks or other non-cash assets is a tax-smart way to support charities while often reducing your tax bill. When you give appreciated long-term assets directly to a qualified 501(c)(3) charity, you generally claim a charitable income tax deduction equal to the asset’s fair market value and you avoid recognizing capital gains that would arise from selling the asset. Charities typically receive the full value and can sell the asset tax-free.

This article explains the tax mechanics, documentation rules, valuation methods, practical examples, pitfalls to avoid, and steps to take before making a non-cash donation. For specific step-by-step donation flows for securities, see our internal guide on Stock Donations: Tax Benefits and Process. For valuation and paperwork details, also review Non-Cash Donations: Valuation, Documentation, and Tax Rules.

How the tax benefit normally works (plain language)

1. Eligible asset: The asset must be qualified property (commonly long-term appreciated property) and the recipient must be a qualified charity.
2. Avoid capital gains: If you donate appreciated property you’ve held more than one year, you usually avoid paying capital gains tax that would apply if you sold the asset and donated the proceeds.
3. Deduction amount: For long-term appreciated property given to a public charity, you generally deduct the fair market value (FMV) on the donation date, subject to adjusted gross income (AGI) limits.
4. Documentation: Non-cash gifts require extra paperwork (acknowledgments, Form 8283, and appraisals for high-value gifts).

Authoritative IRS guidance: see IRS Publication 526 (Charitable Contributions) and IRS Publication 561 (Determining the Value of Donated Property) for rules on deductions and valuation. For Form requirements, see Form 8283 instructions (IRS). (IRS: https://www.irs.gov/charities-non-profits).

Common types of non-cash donations and special rules

• Publicly traded securities (stocks, ETFs): If held >1 year, you usually claim FMV and avoid capital gains. The FMV for listed securities is typically the average of the high and low market price on the donation date (see IRS Pub 561).

• Privately held stock or closely held business interests: Valuation is harder and often requires a qualified appraisal. Deduction is generally limited to your basis unless special rules apply.

• Bonds: Similar to stock if marketable; valuation and tax treatment depend on whether there’s accrued interest.

• Real estate: Can be highly tax-efficient but complex. If appreciated real estate is donated, the donor may deduct FMV (usually subject to a 30% AGI limit for long-term appreciated property to public charities) and avoid capital gains.

• Personal property (art, collectibles, vehicles): Deduction depends on whether the charity uses the item for a related purpose. If the charity sells the item, the deduction is generally limited to your cost basis; if used for charitable purpose, FMV may be allowed. IRS Pub 561 explains the valuation rules.

• Cryptocurrency: Treated like property by the IRS. Donating appreciated crypto held >1 year generally allows deduction of FMV and avoidance of capital gains; follow charity custody and transfer procedures carefully.

Limits and tax-planning details (what to watch for)

• AGI limits: The allowable deduction depends on the asset type and recipient. As a rule of thumb, cash gifts to public charities can be deductible up to 60% of AGI (check the current year rules); long-term appreciated property donated to public charities is generally limited to 30% of AGI. Excess deductible amounts may be carried forward for up to five tax years. See IRS Pub 526 for the exact and current limits.

• Holding period matters: To claim FMV on securities or other capital assets you must have held them for more than one year (long-term). If held one year or less, the deduction is generally limited to your cost basis.

• Form 8283 and appraisals: If a non-cash contribution exceeds $500, you must file Form 8283 with your tax return. For items valued over $5,000, a qualified appraisal is typically required, and the appraiser must sign Section B of Form 8283 (exceptions apply for publicly traded securities). See Form 8283 instructions and IRS Pub 561.

• Written acknowledgments: For any single donation of $250 or more, you must obtain a contemporaneous written acknowledgment from the charity to claim a deduction. Keep bank and brokerage records showing transfer dates.

• Charity status: Only donations to qualified organizations are deductible. Confirm IRS recognition with the Exempt Organizations Select Check tool or the charity’s status. (IRS Charitable Contributions: https://www.irs.gov/charities-non-profits/charitable-contribution-deductions)

Real-world examples (illustrative)

Example 1 — Donating appreciated stock:
You bought 1,000 shares of a public company for $2,000 five years ago. Today, the shares are worth $10,000. If you donate the shares directly to a public charity:

• You generally deduct the $10,000 FMV (subject to AGI limits).
• You avoid recognizing the capital gain (which would have been $8,000 if you sold the shares first), so you save on capital gains taxes.

Example 2 — Donating real estate:
A small business owner donates an appreciated parcel worth $150,000 that she purchased long ago for $30,000. She will generally be able to deduct the FMV (subject to AGI limits and documentation rules) and avoid capital gains that would have applied on a sale. Because real estate donations have valuation complexity, a qualified appraisal and pre-donation discussion with the charity are essential.

In my practice, I’ve advised clients to transfer securities electronically using the charity’s brokerage instructions rather than writing a check after selling — that preserves the tax advantage and keeps recordkeeping straightforward.

Step-by-step checklist before you donate

1. Confirm the charity’s tax-exempt status and obtain written instructions for securities transfer (DTC instructions if the charity accepts electronic transfers).
2. Determine the asset type and holding period. If publicly traded and >1 year, plan to donate the actual shares.
3. For high-value or complex gifts (real estate, private company stock, art), get a qualified appraisal before or shortly after the gift as required.
4. Document everything: contemporaneous written acknowledgment (>$250), Form 8283 (>$500), appraisal (>$5,000), and brokerage confirmation of transfer date.
5. Speak with your tax advisor about AGI limits and whether bunching or donor-advised funds could make the gift more tax efficient.

Common mistakes and how to avoid them

• Selling before donating: Selling appreciated assets and donating cash often costs the donor capital gains taxes and reduces the charitable deduction. Donate the asset directly when tax efficiency matters.

• Skipping appraisals or Form 8283: Failing to attach required forms or appraisals can result in denied deductions or IRS inquiries.

• Assuming every charity can accept securities: Not every small nonprofit has a brokerage account. Contact the charity first or use an intermediary such as a donor-advised fund.

• Misvaluing donated items: For personal property and real estate, poor valuation can trigger audits. Use qualified appraisers when required.

Strategic options to maximize impact

• Donor-Advised Funds (DAFs): If a preferred charity can’t accept complex assets, consider donating to a DAF. You get the tax deduction when you fund the DAF and the DAF distributes cash to charities later. See our related piece on Bunching Donations with Donor-Advised Funds: Year-by-Year Guide. (Note: consult the DAF sponsor about accepting non-cash assets.)

• Bunching: Combine several years of planned giving into one tax year to exceed the standard deduction threshold and get itemized tax benefits.

• Gift splitting and estate planning: Gifts of appreciated assets can be part of estate plans to reduce taxable estates, particularly when combined with trusts, charitable remainder trusts, or charitable gift annuities.

Documentation resources and authoritative links

• IRS Publication 526, Charitable Contributions: https://www.irs.gov/publications/p526
• IRS Publication 561, Determining the Value of Donated Property: https://www.irs.gov/publications/p561
• Form 8283 (Noncash Charitable Contributions) and instructions: https://www.irs.gov/forms-pubs/about-form-8283
• IRS Charitable Contribution Deductions overview: https://www.irs.gov/charities-non-profits/charitable-contribution-deductions

Final thoughts and next steps

Gifts of stock and other non-cash donations are powerful tools to increase charitable impact while taking advantage of tax benefits. The key is planning: verify the charity can accept the asset, confirm transfer procedures, document the gift precisely, and consult a tax professional before the transfer. In my 15+ years advising clients, the most successful outcomes come from early coordination between the donor, the charity, and the donor’s tax advisor.

Professional disclaimer: This article is educational and does not constitute tax or legal advice. Rules change and individual circumstances vary; consult a qualified tax advisor, CPA, or attorney before making significant charitable contributions.

Additional reading on FinHelp.io:

• Stock donations: Stock Donations: Tax Benefits and Process
• Valuation & documentation: Non-Cash Donations: Valuation, Documentation, and Tax Rules