Charitable Donation of Stock: Deduction Limits and IRS Forms

A charitable donation of stock, when the shares are publicly traded and have been held longer than a year, lets you deduct the full fair market value on the day of the gift and avoid the capital gains tax you would owe if you sold the shares first. The deduction is capped at 30% of your adjusted gross income for gifts to public charities, and anything over the cap carries forward for up to five years. You have to itemize to use it, and you have to document it correctly.

Why Transferring Shares Beats Selling and Donating Cash

The mechanic is simple. When you move long-term appreciated stock directly to a qualified charity, no one pays capital gains tax on the growth. You don’t, because you never sold. The charity doesn’t, because it’s tax-exempt. Your deduction is based on what the shares are worth on the gift date, not what you paid for them.

Consider shares you bought for $10,000 that are now worth $50,000. Sell them first and you owe federal capital gains tax on the $40,000 gain. At a combined 23.8% (the 20% long-term rate plus the 3.8% net investment income tax at higher incomes), that’s $9,520 gone before you can write the check. Your cash deduction is limited to what you actually give, $40,480. Transfer the shares directly instead and you skip the $9,520 tax bill, the charity receives the full $50,000, and your deduction is $50,000.¹

The whole advantage depends on the shares being long-term and appreciated. Neither condition is negotiable.

Holding Period and Fair Market Value

The tax code splits stock into two buckets. Held more than one year, it’s long-term capital gain property and the deduction equals fair market value on the gift date. Held one year or less, it’s ordinary income property and the deduction drops to your cost basis, which erases the reason to donate stock instead of cash.¹

For publicly traded shares, fair market value is the average of the highest and lowest selling prices on the gift date, not the open or the close.² If the stock traded between $48 and $52 that day, FMV is $50 per share.

When the Gift Counts as Made

The gift date drives the valuation and the tax year. For shares held in street name at a brokerage, which is how most people hold stock, the gift is complete when the broker’s records show the transfer to the charity, not when you submit the paperwork. For physical certificates sent by mail, the gift date is the mailing date.²

This matters most at year-end. To land the deduction in 2026, broker records must reflect the transfer by December 31, 2026. Electronic transfers take three to six business days, sometimes longer over the holidays, so initiating in the last week of December is a gamble. Early December is the safer window.

Proving When You Bought

Keep the purchase confirmation or account statement showing your acquisition date. If you inherited the shares or received them as a gift, the previous owner’s holding period tacks onto yours, which makes the paper trail harder. Without documentation, the IRS can treat the shares as short-term and cut your deduction down to basis.

How Much You Can Deduct in One Year

The annual limit depends on the type of recipient.

For appreciated stock going to a public charity, the deduction is capped at 30% of your adjusted gross income for the year. Most familiar nonprofits, religious organizations, schools, and donor-advised funds are public charities.¹
For appreciated stock going to a private non-operating foundation, the cap tightens to 20% of AGI. For publicly traded stock specifically, you can still deduct fair market value rather than being pushed back to cost basis.³

Anything over the AGI cap carries forward for up to five more tax years, used in order.⁴ A donor with $200,000 in AGI who gives $100,000 in stock to a public charity can deduct $60,000 this year and carry $40,000 forward.

The 50% Election

You can elect a 50% AGI ceiling instead of 30%, but only if you agree to reduce the deduction from fair market value down to cost basis.¹ For substantially appreciated shares, the trade almost never comes out ahead. It’s mostly useful when the stock hasn’t grown much above what you paid and you’d rather deduct more this year than carry amounts forward.

You Have to Itemize

The deduction only shows up on your return if you itemize on Schedule A instead of taking the standard deduction.³ For 2026, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.⁵ Your stock gift plus mortgage interest, state and local taxes, and other qualifying items has to clear that number for the donation to change your tax bill. A big enough stock gift can be what tips you into itemizing.

When Stock Is the Wrong Thing to Give

Donating shares that have dropped in value is usually a mistake. Pay $20,000 for stock now worth $12,000, transfer it to charity, and your deduction is capped at the $12,000 fair market value. The $8,000 loss disappears. Sell the shares yourself instead, claim the capital loss against other gains or up to $3,000 of ordinary income, then donate the $12,000 in cash. You get both deductions.

Short-term shares are similarly unattractive because the deduction is limited to cost basis. Donating them buys you nothing over cash and forfeits the option to harvest a loss if the position is underwater. The strategy earns its keep only on long-term unrealized gains.

How to Actually Move the Shares

Start by asking the charity for its brokerage information: the receiving firm’s name, the account number, and the DTC (Depository Trust Company) number. Any organization that accepts stock gifts will have these ready. Grab the charity’s exact legal name and its EIN while you’re at it, for your records.

The Letter of Authorization

You transfer shares by sending a signed Letter of Authorization to your broker. Most major firms have an online form or a downloadable PDF. It should specify:

The ticker symbol, number of shares, and ideally the specific tax lot to move.
The charity’s brokerage firm, account number, and DTC number.
Your brokerage account number.

Choosing the tax lot is where the math gets sharper. If you bought the same stock in several batches, pick the lot with the lowest cost basis. That’s the one carrying the biggest unrealized gain, which means you dodge the most capital gains tax and claim a deduction based on the same fair market value you’d get from any other lot. Your broker can pull up the lots for you.

Timing the Transfer

Electronic transfers between brokerages typically clear in three to six business days. During that stretch, the shares have left your control but may not yet appear in the charity’s account. Watch your own statement to confirm they’ve moved, and follow up with the charity if the confirmation is slow. Give year-end gifts extra room.

Documentation the IRS Requires

The Charity’s Written Acknowledgment

Any single stock gift of $250 or more needs a contemporaneous written acknowledgment from the charity, in hand before you file. It must name the organization, describe the shares (charities don’t state the value, that’s on you), give the transfer date, and state whether you received any goods or services in exchange.⁶ No letter, no deduction, no matter how clean your own records are.

Form 8283

If your total noncash charitable contributions for the year top $500, you file Form 8283 with your return.⁷ For publicly traded stock, you complete Section A and report the stock name, ticker, share count, acquisition date, cost basis, and fair market value on the gift date. Non-publicly traded securities over $5,000 require Section B and a qualified appraisal signed by the appraiser.⁸

What to Keep

Hold on to your original purchase confirmation, the Letter of Authorization, the charity’s acknowledgment, the brokerage statement showing the shares leaving your account, and the filed Form 8283. In an audit, the burden is on you to prove the holding period, the valuation, and the charity’s tax-exempt status. You can verify the last one through the IRS Tax Exempt Organization Search on irs.gov before you give.

Private Company Shares and Restricted Stock

Private company shares can be donated, but the process is heavier. Because there’s no public price, any gift above $5,000 needs a qualified appraisal by an independent appraiser meeting IRS education, experience, and independence requirements.² The appraisal has to be signed no earlier than 60 days before the gift and no later than the due date of the return, including extensions, on which the deduction is first claimed. Fees can’t be tied to the appraised value.

Stock acquired through private placements, employee benefit plans, or as compensation often carries SEC Rule 144 transfer restrictions, usually flagged by a legend on the certificate.⁹ Donating restricted shares typically requires the issuer’s consent and an opinion letter from its counsel so the transfer agent can lift the legend. Some charities won’t accept restricted stock at all. Ask before you plan around it.

Donor-Advised Funds as a Timing Tool

If you want the deduction now but haven’t picked the charities yet, a donor-advised fund can hold the gift. You transfer the stock into the fund, claim the deduction for the year of the transfer, and recommend grants to specific charities over time. The rules are the same: no capital gains tax on the appreciation, fair market value deduction for long-term shares, 30% AGI cap.³

Donor-advised funds also help donors who want to concentrate several years of giving into one tax year to clear the standard deduction threshold, then take the standard deduction in the years between.⁵ The fund holds the assets while you direct the grants on your own schedule.

1
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
2
Internal Revenue Service. Publication 561 – Determining the Value of Donated Property
3
Internal Revenue Service. Publication 526 – Charitable Contributions
4
eCFR. 26 CFR 1.170A-10 – Charitable Contributions Carryovers of Individuals
5
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
6
Internal Revenue Service. Charitable Contributions – Written Acknowledgments
7
Internal Revenue Service. About Form 8283, Noncash Charitable Contributions
8
Internal Revenue Service. Form 8283 – Noncash Charitable Contributions
9
U.S. Securities and Exchange Commission. Rule 144 – Selling Restricted and Control Securities