Gifting Appreciated Stock

Why do the savviest donors almost never give cash to charity? Because giving appreciated stock instead is one of the cleanest tax wins in the whole code. When you donate stock you’ve held more than a year directly to a charity, you skip the capital gains tax you’d owe on the sale and you deduct the full market value. The charity sells it tax-free. Everybody wins except the IRS.

The charitable version: do this

Say you own stock you bought for $30,000, now worth $130,000, and you want to give $130,000 to your alma mater. You have two paths.

Sell the stock, pay capital gains tax on the $100,000 gain, then donate what’s left. Or hand the shares to the charity directly. The charity is tax-exempt, so it sells with no tax, keeps the full $130,000, and you deduct $130,000. You gave the same gift and kept the capital gains tax in your pocket. On a $100,000 gain at the top 23.8% rate, that’s nearly $24,000 you didn’t have to send to Washington.

This is why I tell charitably-minded clients to fund their giving from their most-appreciated holdings, never from cash. If you want to keep the specific stock, donate the shares and use your cash to buy them back. Now you own the same position with a fresh, higher basis. For donors who give every year, routing it all through a donor-advised fund makes this a one-step habit instead of an annual scramble.

The family version: the trap

Now flip the recipient from a charity to your children, and the same move turns against you. Charities don’t pay capital gains tax, so the embedded gain disappears. Your kids do pay it, and when you gift them appreciated stock, they inherit your low basis right along with it. That $30,000 basis follows the shares to them. Sell, and they owe tax on the full $100,000 gain you built up.

Here’s the part the gifting enthusiasts skip. If you’d simply held that stock until death, your heirs would get a step-up in basis to the date-of-death value, and the entire $100,000 gain would evaporate. So gifting appreciated stock to family during your life can hand them a tax that holding it would have erased. The instinct to give early, the one the now-expired estate tax sunset drummed into everyone, quietly costs your children money. That’s the step-up versus lifetime gifting trade in one sentence.

What changed in 2026

With the federal estate exemption permanent at $15,000,000 per person for 2026, most families have no federal estate tax reason to gift appreciated assets out of the estate at all. Under that line, holding low-basis stock for the step-up beats gifting it. The annual gift exclusion is $19,000 per recipient for 2026, so if you do want to move stock to family, you can transfer up to that value per person per year without touching your lifetime exemption. Just give them high-basis shares, not your deepest winners.

The rule worth remembering

Sort gifts by recipient. To charity, give your most-appreciated stock and skip the capital gains tax. To family, give cash or high-basis assets and let the low-basis winners ride until death, where the step-up cleans them for free. Same generosity, opposite tax outcomes, decided entirely by who’s on the receiving end.