What are the tax benefits of donating appreciated stock held long-term versus donating cash to a qualified charity in 2025?

Donating appreciated assets, such as stocks or mutual funds held for more than one year (long-term capital gain property), often provides superior tax benefits compared to donating the equivalent cash amount to a qualified public charity in 2025.

### Donating Appreciated Stock (Long-Term Holding)

When you donate appreciated stock that you have held for over one year, you generally receive a two-fold tax advantage:

• Deduction for Fair Market Value (FMV): You can usually deduct the full fair market value of the stock on the date of the contribution, provided you itemize deductions. This deduction is subject to certain Adjusted Gross Income (AGI) limitations (usually 60% of AGI for cash gifts, but often 30% of AGI for appreciated property gifts, though limitations can vary).
• Avoidance of Capital Gains Tax: This is the most significant benefit. By donating the stock directly, you avoid paying capital gains tax on the appreciation. If you sold the stock first and then donated the cash proceeds, you would owe tax on the gain, reducing the total amount available for deduction.

Example Scenario (Itemizing): Assume you bought stock for USD 10,000 (cost basis) that is now worth USD 50,000. The appreciation is USD 40,000.

• Option A (Donate Stock): Deduct USD 50,000 (subject to AGI limits). You pay zero capital gains tax on the USD 40,000 gain.
• Option B (Sell Stock, then Donate Cash): You pay capital gains tax on the USD 40,000 gain (e.g., 15% or 20% rate). You can only deduct the net cash received (USD 50,000 minus capital gains tax paid).

### Donating Cash

If you donate cash, you can only deduct the amount of cash contributed. If you itemize deductions, this deduction is limited to 60% of your AGI for 2025.

### Important Caveats and Rules

• Holding Period: The stock must have been held for more than one year to qualify for the FMV deduction and capital gains avoidance. If held for one year or less (short-term), the deduction is limited to your cost basis.
• Itemizing Requirement: You can only claim charitable deductions if you itemize deductions on Schedule A (Form 1040). If you take the standard deduction, neither cash nor stock donations provide a current-year tax benefit.
• Qualified Organizations: The deduction is only available for donations made to qualified public charities (e.g., churches, hospitals, educational institutions). Donations to private non-operating foundations have stricter AGI limits.
• Form Requirements: For donations of appreciated property valued over USD 5,000, you must generally attach Form 8283, Noncash Charitable Contributions.

For taxpayers who itemize, donating appreciated long-term assets is generally the most tax-efficient method of giving.

IRS Reference: Publication 526, Charitable Contributions, details the rules regarding property donations and AGI limitations.