Donating Appreciated Stock in 2026

How a direct transfer can reduce capital gains exposure and support a charitable deduction

A stock gift can be more efficient than a cash gift when the shares have risen substantially in value. If an investor transfers eligible shares directly to a qualified charity, the investor generally does not recognize the built in gain. An itemizing donor may also start with the shares' fair market value when calculating the charitable contribution, subject to the federal rules that limit what can be deducted in the current year.

The result is not automatic. The holding period, the type of organization, the date ownership changes, the donor's other deductions, and the paperwork all matter. The 2026 rules add another calculation that older stock donation articles do not address.

What changed in 2026: An itemizer may deduct charitable contributions only to the extent they exceed 0.5 percent of adjusted gross income. A separate deduction of up to $1,000, or $2,000 for a married couple filing jointly, is available to some nonitemizers, but it applies to qualifying cash contributions. Donated shares do not qualify for that cash only deduction.

Why a Direct Stock Gift Can Work

A direct transfer avoids a sale by the donor. When the donated shares are capital gain property, the donor generally does not include the unrealized appreciation in income. If the gift otherwise qualifies, fair market value is normally the starting amount for the charitable contribution calculation.

Selling first changes the sequence. The investor realizes the gain, then makes a cash gift. If the investor contributes only the sale proceeds left after reserving money for tax, the charity receives less. If the investor contributes the full gross proceeds, the charity can receive the same dollar amount, but the investor needs another source of cash for the tax generated by the sale.

Approach	Federal tax result	Planning point
Transfer eligible long term shares	The donor generally does not recognize the built in gain. The contribution may start at fair market value before limits.	Useful for highly appreciated shares when the donor itemizes and the charity accepts securities.
Sell shares and give cash	The donor recognizes gain on the sale. The deduction is based on cash actually contributed.	Practical when the charity cannot receive stock, but the sale creates a tax cost.
Give cash from savings	No investment is sold or embedded gain avoided. The cash gift rules apply.	Straightforward when the shares should remain in the portfolio.

Check the Holding Period First

Stock is capital gain property when a sale at fair market value on the contribution date would produce a long term capital gain. For most investment shares, that means the donor has held the stock for more than one year. The contribution can generally be measured at fair market value, although organization based limits and other exceptions still apply.

Shares held for one year or less do not receive the same treatment. For appreciated short term shares, the contribution amount is generally reduced by the gain that would have been ordinary income or short term capital gain. In practice, the deductible amount is usually no greater than basis, and a decline in value can reduce it further.

Start with the tax lots: Two positions with the same market value can produce different results. Review acquisition dates, adjusted basis, restrictions, and unrealized gain before selecting the shares. A transfer request should identify the specific lots rather than leave the choice to chance.

See the 2026 Deduction Limits Together

The market value of the shares is not necessarily the amount that reduces taxable income for 2026. Several rules apply to the same gift, and other donations made during the year can affect the result.

1. Itemizing requirement: A donor must itemize to claim a deduction for donated stock. The new nonitemizer deduction is limited to qualifying cash contributions.

2. New federal floor: The 2026 charitable deduction begins only above 0.5 percent of adjusted gross income. The IRS says amounts blocked by this floor are added to charitable carryover calculations and may be available in a later year.

3. Contribution category: Long term capital gain property contributed to many public charities is generally subject to a limit of 30 percent of adjusted gross income when fair market value is used. Other organization and contribution categories can carry 20 percent, 30 percent, or 50 percent limits.

4. Basis election: A donor can elect to use the 50 percent limit for certain capital gain property gifts, but the contribution amount is reduced by the appreciation. The election applies more broadly than one selected stock gift, so it should be modeled before filing.

5. Other limits: Amounts that exceed the applicable percentage limits can generally be carried forward for as many as five years. Higher income itemizers may also face a separate overall reduction of itemized deductions in 2026.

A Simple Illustration

Assume an investor owns publicly traded shares worth $80,000 with an adjusted basis of $20,000. The shares have been held for more than one year, and the intended recipient is a qualifying public charity.

6. Direct transfer: The investor generally does not recognize the $60,000 of appreciation. The gift begins with an $80,000 fair market value before the 2026 floor, percentage limits, other itemized deduction rules, and any carryover are applied.

7. Sale followed by cash gift: The investor realizes a $60,000 gain. Donating only the cash remaining after setting aside tax would reduce the amount received by the charity. Donating the full $80,000 would require the investor to cover the sale tax from other funds.

This example shows the mechanics, not a promised tax saving. The actual outcome depends on the investor's capital gain rate, net investment income tax, state law, itemized deductions, adjusted gross income, other charitable gifts, and available carryovers.

Verify the Charity and Finish the Transfer

Use the IRS Tax Exempt Organization Search before assuming a gift is deductible. Also ask the organization whether it accepts securities and request its current brokerage instructions, exact legal name, account information, and contact for confirming receipt. A valid tax exempt status does not guarantee that an organization has a process for accepting stock.

Give the broker written instructions that identify the security, the number of shares, and the specific tax lots. Keep the transfer request and the broker's completion record. The contribution date is based on delivery or transfer of ownership under the applicable rule, not merely the day the donor signs or submits a request. Electronic transfers can take time, so year end gifts should begin well before the last trading days of December.

A pending sale needs early advice: If the shares are part of a merger, redemption, tender offer, or business sale that is already far along, the assignment of income doctrine may place the gain on the donor even though the charity receives the shares. Complete legal and tax review before the right to sale proceeds becomes fixed.

Value the Shares on the Correct Date

For stock traded in an active public market, IRS guidance generally values each share at the midpoint between that day's highest and lowest quoted sale prices. This is not necessarily the closing price. If no sale occurs on the valuation date, a weighted calculation using the nearest trading dates before and after that date may be required.

Retain the number of shares, the completed transfer date, the exchange used, the daily high and low prices, and the calculation. A brokerage statement can help prove the transfer, but it may not contain the charitable value required for the return.

Match the Records to Form 8283

Noncash gifts have their own reporting rules. If the total deduction for all noncash contributions for the year is more than $500, Form 8283 generally must be attached to the return. Publicly traded securities are reported in Section A even when their value exceeds $5,000. A qualified appraisal is generally not required for publicly traded securities.

Nonpublicly traded shares follow a different path. A contribution over $5,000 usually requires Section B, a qualified appraisal, and the required signatures. If the deduction for privately held property exceeds $500,000, the appraisal generally must also be attached to the return. Restricted shares, closely held business interests, partnership interests, and digital assets need separate review rather than being treated as ordinary exchange traded stock.

8. Charity acknowledgment: For a noncash contribution of $250 or more, obtain a contemporaneous written acknowledgment that describes the property and states whether the charity provided goods or services. The charity is not required to assign the value.

9. Donor records: Keep purchase confirmations or other basis records, acquisition dates, lot identification, transfer confirmations, and the fair market value calculation.

10. Return filing: Review the current form and instructions for the contribution year. Reporting thresholds can sound simple, but exceptions depend on the asset rather than only its dollar value.

When a Donor Advised Fund May Help

A donor advised fund can accept a contribution in one year and allow the donor to recommend grants to operating charities later. The sponsoring organization takes legal control of the contributed property, while the donor keeps advisory privileges. The charitable deduction, if allowed, relates to the contribution to the sponsor. Later grants from the account do not create a second deduction.

This structure can help when a donor wants to make one larger stock gift in a high income year but distribute charitable support over time. Before transferring shares, review the sponsor's asset acceptance rules, fees, investment choices, grant policies, and acknowledgment language. For a donor advised fund contribution, the acknowledgment must confirm that the sponsor has exclusive legal control over the assets.

Situations That Need More Review

11. Stock worth less than basis: Donating depreciated shares usually gives up the investor's opportunity to recognize the capital loss. Selling the shares and donating cash may be preferable, subject to the loss rules.

12. Short holding period: The fair market value approach generally is not available when a sale would produce short term gain or ordinary income.

13. Private or restricted interests: Transfer restrictions, buy sell agreements, company approvals, valuation, unrelated business income concerns, and a pending transaction can all change the analysis.

14. Private foundation gifts: Organization classification affects both the deduction amount and the adjusted gross income limit. Do not assume that a private foundation follows the same rule as a public charity.

15. State tax treatment: Federal treatment does not determine every state result. Confirm whether the state follows the federal contribution and capital gain rules.

A Practical Stock Gift Checklist

16. Set the charitable goal. Choose the organization and intended gift amount before selecting securities.

17. Review the tax lots. Compare basis, holding period, market value, restrictions, and portfolio concentration.

18. Model the federal limits. Estimate whether the donor will itemize, then apply the 2026 floor, the relevant percentage category, other gifts, the overall itemized deduction rule, and carryovers.

19. Confirm the recipient. Verify deductibility in the IRS search tool and obtain the charity's current securities transfer instructions.

20.  Transfer the shares early. Identify specific lots, monitor delivery, and obtain written confirmation of the completed transfer date.

21.  Assemble the tax file. Keep the acknowledgment, transfer records, basis data, valuation support, Form 8283, and any appraisal that the asset requires.

The Bottom Line

A direct gift of appreciated publicly traded stock can remove a taxable sale from the donor's plan and may support a deduction based on fair market value. The strategy works best when the shares have been held for more than one year, the recipient qualifies and can accept them, the donor itemizes, and the transfer is completed before any sale right becomes fixed.

For 2026, the analysis must also include the new 0.5 percent charitable deduction floor and any overall itemized deduction reduction. Confirm the tax lots, model the limits, document the transfer, and match the return to the right Form 8283 rules before treating the market value as a current year deduction.

Ready to compare a stock gift with a cash gift? Brilliant Solutions Group can help organize the tax information, model the federal deduction rules, and identify issues that need investment or legal advice. Contact Brilliant Solutions Group.

 Sources

Official sources reviewed for this article. Tax laws, forms, regulations, and IRS guidance can change.

IRS Publication 505 for 2026 (the 2026 nonitemizer cash deduction, the 0.5 percent itemized charitable floor, carryover treatment, and the overall itemized deduction limitation; accessed September 23, 2026)

IRS Topic 506 Charitable Contributions (qualified organizations and the 2026 deduction for qualifying cash contributions by nonitemizers; accessed September 23, 2026)

IRS Publication 526 Charitable Contributions (capital gain property, fair market value, adjusted gross income limits, the basis election, substantiation, and five year carryovers)

IRS Publication 561 Determining the Value of Donated Property (contribution date and publicly traded stock valuation using the average of high and low selling prices)

IRS Instructions for Form 8283 (Section A for publicly traded securities, Section B for other property over $5,000, and qualified appraisal requirements)

IRS Tax Exempt Organization Search (organization eligibility and deductibility status)

IRS Donor Advised Funds (sponsoring organization control and donor advisory privileges)

IRS Chief Counsel Advice 201012050 (assignment of income analysis for a transfer of appreciated property before a sale; nonprecedential and fact specific)

Important: This article provides general federal tax information and is not tax, legal, investment, or financial advice. Results depend on the donor, asset, organization, transfer documents, other contributions, and law in effect. State rules may differ. Consult qualified tax, legal, and investment professionals before transferring securities or filing a return.