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This guide explains the federal rules in IRS Publication 526 (2025), Publication 561 (December 2025), and the December 2025 Form 8283 instructions. State taxes, issuer restrictions, company-owned stock, and donor-advised-fund policies can produce different outcomes and require separate confirmation.
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What happens when you give appreciated stock instead of selling it
When you sell appreciated shares, the difference between your adjusted basis and sale proceeds is generally a capital gain. A direct charitable transfer can change the sequence: the charity receives the shares, and you do not first sell them and receive the proceeds. If the shares are eligible long-term capital-gain property and the recipient is a qualified organization, the federal deduction is generally based on fair market value (FMV), subject to percentage limits and other rules. The IRS describes these rules in Publication 526 (2025).
That does not mean every stock gift eliminates tax. A deduction is not a dollar-for-dollar credit, the deduction can be limited by AGI, and a gift that fails the qualification, ownership, holding-period, valuation, or documentation tests can be reduced or disallowed.
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Long-term shares
For charitable-contribution purposes, capital assets held more than one year are generally capital-gain property. A qualifying contribution of such shares can generally be valued at FMV rather than the donor’s lower basis, although exceptions and deduction limits apply. For a publicly traded security, market quotations normally provide the starting point for FMV.
Short-term shares
Shares held one year or less are generally ordinary-income property. The deduction is generally reduced by the amount of appreciation, which often leaves a deduction no greater than basis. Donating short-term shares can therefore forfeit the potential deduction for the unrealized appreciation; selling or waiting until the holding period exceeds one year may produce a different result, but the correct choice depends on the donor’s facts.
Why the gain is not simply “forgiven”
The tax effect comes from two separate rules: the charity may receive property without the donor recognizing the gain on a sale, while the donor may claim a charitable deduction if all requirements are met. The deduction’s value depends on taxable income, filing status, AGI limits, itemization, and other contributions. It is not a promise that the entire built-in gain becomes tax savings.
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“Company stock” can mean shares personally owned by an employee, founder, or investor, or shares held by a corporation, partnership, trust, or other entity. Those are different taxpayers. Do not transfer shares from a company account and report the gift as though you personally owned them.
| Ownership situation | Taxpayer considering the deduction | Questions to resolve before a transfer |
|---|---|---|
| Individual brokerage account | The individual shareholder | Holding period, basis, recipient qualification, AGI limits, and personal substantiation |
| Employer equity-plan account | Usually the individual once shares are actually owned; plan terms control transferability | Vesting, settlement, lockups, insider-trading windows, legends, and broker instructions |
| Shares owned by a corporation or other entity | The entity, subject to its own tax and accounting rules | Entity authority, governing documents, basis, valuation, charitable-contribution limits, and professional advice |
| Restricted or privately issued shares | The legal owner, if a transfer is permitted | Issuer consent, rights of first refusal, securities restrictions, valuation evidence, and charity acceptance |
The IRS material cited here principally addresses taxpayer contributions. It does not establish the tax result for a particular company, equity plan, state, or entity. If a business is the owner, have the entity’s tax adviser determine whether and how it can make the contribution rather than treating the transaction as a personal gift.
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Step-by-step: donate shares and document the deduction
- Inventory the exact shares. Record the issuer, class, number of shares, account registration, acquisition dates, lots, basis, and any restrictions. Separate lots with different holding periods; a single ticker symbol can contain both short-term and long-term shares.
- Confirm the holding period. The federal rule generally treats shares held more than one year as capital-gain property and shares held one year or less as ordinary-income property. Use trade and settlement records and check how the plan or broker calculates the acquisition date. Keep records showing the date each lot became yours.
- Verify the recipient. A deduction generally requires a qualified organization. Use the IRS Tax Exempt Organization Search and obtain the charity’s legal name, address, and confirmation that it is eligible to receive deductible contributions. A gift earmarked for a named individual is not generally a deductible charitable contribution under the general rule.
- Ask whether the organization can accept this security. Before initiating a transfer, ask the charity, its custodian, or a donor-advised-fund sponsor for delivery instructions, eligible account types, minimums, fees, blackout dates, and liquidation procedures. Acceptance policies are provider-specific; do not assume that a recipient accepts private, restricted, fractional, or thinly traded shares.
- Estimate the deduction and AGI limits. Combine this gift with your other charitable contributions for the year. For many gifts of long-term capital-gain property to public charities, a 30%-of-AGI limit applies when claiming FMV, but the IRS also describes 20%, 30%, 50%, and 60% limits depending on property, recipient, elections, and circumstances. Unused amounts may be carried forward under applicable rules. Read the current Publication 526 rules for your contribution category.
- Obtain written transfer instructions. The receiving organization should provide its brokerage account information, DTC or custodian details when applicable, a contact for restricted stock, and the name to place on the transfer. Confirm whether the charity wants the donor to initiate the transfer or wants a signed letter of authorization.
- Initiate and verify delivery. Submit the broker’s transfer form, charity authorization, and any issuer paperwork. Ask both sides to confirm the number of shares and the date the charity obtained control. A planned transfer that never settles is not a completed contribution.
- Establish FMV for the contribution date. For publicly traded shares, retain the exchange quotation and the method used to determine the value. For private or restricted shares, obtain the evidence the charity and your tax adviser require; the IRS sources do not establish a universal valuation method for every private share.
- Collect the acknowledgment. Request a contemporaneous written acknowledgment describing the property, date received, and whether the charity provided goods or services. For a quid-pro-quo contribution, the charity’s written disclosure rules can apply when the payment exceeds $75; that $75 figure is not the general stock-substantiation threshold.
- Complete the tax reporting. Depending on the value and nature of the gift, attach Form 8283 and obtain the required charity signature. Keep brokerage statements, transfer confirmations, acquisition and basis records, the acknowledgment, valuation support, and copies of every form with your tax file.
Direct charity transfer or donor-advised fund?
Both routes can begin with a transfer of shares, but they serve different purposes. A donor-advised fund (DAF) sponsor becomes the recipient of the contribution and may let you recommend grants to operating charities later. A direct gift sends the shares to the intended organization. The IRS materials do not verify the terms of any particular sponsor, so obtain written terms before choosing.
| Decision point | Direct transfer to a qualified charity | Transfer to a donor-advised-fund sponsor |
|---|---|---|
| Recipient and acceptance | The operating charity must be qualified and accept the specific shares | The sponsor must be qualified and accept the specific shares; later grantees have their own eligibility rules |
| Timing of grants | Funds support the named charity after its receipt and liquidation policy | The initial contribution is made first; grants are recommended later under sponsor rules |
| Flexibility | Simple when you already know the beneficiary | Can centralize future grant recommendations, subject to sponsor discretion and policies |
| Fees and minimums | Varies by charity and custodian; verify in writing | Varies by sponsor; fees, minimums, and investment choices were not established by the IRS sources |
| Records | Obtain the charity acknowledgment and any required Form 8283 signature | Obtain the sponsor acknowledgment and retain evidence of the later grant recommendations |
Long-term versus short-term stock
| Feature | Held one year or less | Held more than one year |
|---|---|---|
| Federal charitable-property classification | Generally ordinary-income property | Generally capital-gain property |
| Potential deduction basis | Generally reduced by short-term appreciation; often no more than basis | Generally FMV for qualifying gifts, subject to exceptions |
| Typical AGI issue | Property and recipient rules determine the applicable limit | Many gifts to public charities are subject to a 30%-of-AGI limit when claimed at FMV |
| Planning question | Would waiting until the lot passes one year be practical and lawful? | Is the recipient qualified, and can you substantiate FMV and the transfer? |
The one-year test applies to each lot, not simply to the ticker symbol. If a broker uses specific-lot identification, designate the long-term lots before the transfer and retain confirmation. If the broker uses average cost or another method, ask how the transferred shares are identified for tax reporting.
Publicly traded, private, and restricted shares
| Issue | Publicly traded shares | Private or restricted shares |
|---|---|---|
| Transferability | Often operationally straightforward, but account and custodian instructions still matter | May require issuer consent, securities-law review, a waiver, or a buyer approved by the issuer |
| Market quotation | Exchange quotations can support FMV | No continuous public quotation may exist; valuation evidence is more involved |
| Appraisal | Certain publicly traded securities are excepted from qualified-appraisal requirements | Do not assume an exception; appraisal and additional substantiation may be required |
| Charity acceptance | Many organizations have established brokerage procedures, but acceptance is not universal | Acceptance may be declined because of transfer restrictions, liquidation cost, or valuation uncertainty |
| Primary risk | Missing transfer confirmation or incorrect lot and FMV records | Transfer prohibition, disputed value, or incomplete appraisal and issuer documentation |
“Qualified appreciated stock” is a defined term in a particular private-foundation rule. Publication 526 describes a threshold involving contributions by the donor and family of more than 10% of the value of all outstanding stock. That 10% threshold is not a general restriction on every donation of private-company shares; it should not be used as a blanket yes-or-no test.
Fair market value and appraisal rules
FMV is the price at which property would change hands between a willing buyer and willing seller, neither being under a compulsion to buy or sell and both having reasonable knowledge of relevant facts. For listed shares, use reliable market quotations for the contribution date and document the calculation. For restricted shares, discounts, transfer limits, and control features can affect value; have a qualified valuation professional and tax adviser determine what evidence is appropriate.
Publication 561 (December 2025) and the December 2025 Instructions for Form 8283 explain appraisal and reporting requirements. Certain publicly traded securities are excepted from the qualified-appraisal requirement, but an exception does not eliminate the need to substantiate the contribution or support the claimed value.
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Thresholds that commonly trigger paperwork
- $250: A separate contemporaneous written acknowledgment is generally required for a contribution of $250 or more. The acknowledgment must describe the contribution and state whether the charity provided goods or services, or include the required good-faith valuation of those benefits.
- $500: Noncash contributions above this level can trigger additional information on Form 8283 and recordkeeping requirements. Review the tax-year instructions for the exact reporting line and exception.
- $5,000: Noncash gifts above this level commonly involve qualified-appraisal and charity-signature rules, with special exceptions for certain publicly traded securities. Do not apply the $5,000 rule mechanically to every stock transfer; use the current instructions for the security and claimed value.
- $75: A charity generally must provide written disclosure for a quid-pro-quo contribution exceeding $75. This is a disclosure rule for payments that include goods or services, not the general threshold for documenting a stock gift.
Thresholds can interact. A gift may need a written acknowledgment, Form 8283, an appraisal, a charity signature, or several of these at once. Keep the applicable year’s forms and instructions rather than relying on a prior-year checklist.
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The IRS states that a charitable deduction generally cannot exceed 60% of AGI, while 20%, 30%, or 50% limits can apply in other cases. For many noncash gifts of capital-gain property to 50%-limit organizations, claiming FMV brings a 30%-of-AGI limit into play. These percentages are not interchangeable caps: recipient classification, property type, whether you elect to reduce the claimed value, and your other gifts for the year all matter.
Calculate the limit against your contribution plan for the entire year, not just the stock transfer. Cash gifts, other securities, private-foundation contributions, and gifts to different types of organizations can fall under different percentage categories. If the allowable deduction is smaller than the contribution, the unused amount may be carried forward under the applicable rules. Track the carryforward by tax year and contribution type.
Publication 526 also describes an election in some circumstances to reduce the claimed value of capital-gain property in exchange for a different percentage limit. That election can affect the current-year deduction and the treatment of appreciation. Make it only after comparing the current-year limit, expected future income, and carryforward period with a tax professional.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Illustrative calculations (not a tax result)
Long-term public shares
Assume an individual owns 1,000 publicly traded shares with a $20,000 total basis and an $80,000 FMV on the date of a direct transfer to a qualifying public charity. The shares were acquired more than one year earlier. The potential federal deduction is generally considered at the $80,000 FMV, not automatically at the $20,000 basis, but the donor must apply the applicable AGI percentage limit, itemization rules, documentation requirements, and any other contribution limits. The example does not calculate the donor’s tax savings or establish that a particular charity accepts the shares.
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Short-term public shares
Assume the same $20,000 basis and $80,000 FMV, but the shares were held six months. Because the shares are generally ordinary-income property, the deduction is generally reduced by the $60,000 short-term appreciation and may be limited to the basis. Waiting until the shares become long-term property could change the deduction analysis, but market risk, employment restrictions, and personal circumstances may make waiting unsuitable.
Forms and records checklist
- Brokerage statements showing the account owner, share count, acquisition dates, and basis.
- Equity-plan documents, vesting records, legends, and issuer approvals for restricted or employer-plan shares.
- Written confirmation that the recipient is a qualified organization and can receive the security.
- Transfer instructions, signed authorizations, delivery date, and confirmation of the exact number of shares delivered.
- FMV evidence for the contribution date, including market quotations or an appropriate valuation report.
- Contemporaneous written acknowledgment from the charity or DAF sponsor.
- Form 8283 and any required charity signature or appraisal attachment, using the applicable tax-year instructions.
- Records of other charitable contributions, AGI limits, elections, and any carryforward calculation.
Keep these records with the return for the year of the gift and for the period required by your tax adviser. If the charity sends an acknowledgment after year-end, verify that it is contemporaneous under the applicable rule before filing.
Common mistakes and how to fix them
Selling first and donating cash without comparing the alternatives
A sale followed by a cash gift is a different transaction. The sale can create a capital gain before the cash donation deduction is considered. If your goal is to give appreciated shares, ask the charity and broker whether an in-kind transfer can be completed directly.
Assuming every “nonprofit” is deductible
Nonprofit status alone is not enough. Confirm that the specific legal organization is qualified for deductible contributions and that the gift is not earmarked for a private individual.
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Transferring recently acquired shares while believing you gave older shares can convert a planned long-term gift into a short-term one. Identify lots in writing and reconcile the broker’s confirmation after settlement.
Ignoring acceptance and transfer restrictions
A charity may reject private, restricted, fractional, or illiquid shares. Obtain acceptance before moving the shares; otherwise, you may face a failed transfer, return fees, or an unintended sale.
Treating the 30% limit as universal
The 30%-of-AGI figure applies commonly to a particular category of long-term capital-gain property gifts, not to every charitable contribution. Determine the recipient category, property type, election, and interaction with other gifts.
Assuming an appraisal exception removes all paperwork
Publicly traded securities can qualify for an appraisal exception, but you still need a supportable value, acknowledgment, and any required Form 8283 information. Follow the current Publication 561 and Form 8283 instructions.
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Confusing the individual and the company
If the company owns the shares, the company—not its shareholder—must analyze authority, accounting, tax treatment, and reporting. Do not use a personal brokerage transfer to disguise an entity contribution.
Federal scope and when to obtain advice
The rules described here are federal U.S. rules. The cited IRS publications do not settle state income-tax treatment, local taxes, an issuer’s transfer restrictions, a particular company’s equity-plan terms, or the policies and fees of a specific donor-advised-fund sponsor. Rules and forms can change, so use the instructions for the tax year in which the transfer occurs.
Get individualized advice before transferring private-company or restricted shares, donating a large block, contributing through an entity, relying on a carryforward, or making a gift that could approach the 10% qualified-appreciated-stock threshold for a private-foundation rule. A tax professional can coordinate the broker, issuer, charity, valuation professional, and return preparer so that ownership, timing, value, and reporting all match.
Quick Recap
Quick decision checklist
- Is the donor the individual shareholder or an entity that owns the shares?
- Which specific lots have been held more than one year?
- Is the recipient a qualified organization, and has it agreed to accept these shares?
- Will the transfer be direct, or will a DAF sponsor receive the shares first?
- What FMV evidence is available on the delivery date?
- Which AGI percentage limit applies after considering all gifts and any election?
- Do the $250, $500, or $5,000 documentation thresholds trigger an acknowledgment, Form 8283, appraisal, or charity signature?
- Do you have settlement confirmation and a complete record set before filing?
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