Donating appreciated shares beats selling them first
If you give to charity and you hold RSU or ESPP shares that have risen since vesting, there's a right order of operations — and most people do it backwards. Donating the shares directly is worth materially more than selling first and donating the cash.
The two paths, side by side
Say you hold $10,000 of company stock with a $4,000 cost basis (what it was worth at vest), and you want to give $10,000 to charity:
- Sell first, donate cash: you owe capital gains tax on the $6,000 gain — at 15%, that's $900 gone — then donate the remaining $9,100. Your deduction is $9,100 and the charity gets $9,100.
- Donate the shares directly: you transfer the shares to the charity without selling. You deduct the full $10,000 fair market value, you pay $0 in capital gains tax, and the charity — as a tax-exempt organization — sells the shares tax-free and gets the full $10,000.
Same generosity, ~$900+ better outcome. The gap grows with the size of the gain.
The requirements
- You must itemize deductions. If you take the standard deduction ($16,100 single / $32,200 married in 2026), charitable gifts give you no tax benefit either way. This strategy is for itemizers.
- Hold the shares more than one year. Shares held longer than a year qualify for a fair-market-value deduction. Shares held a year or less are generally deductible only at your cost basis — which kills most of the advantage.
- Give to a qualified public charity (or a donor-advised fund, which counts). Deductions for gifts of appreciated stock are generally limited to 30% of your adjusted gross income, with excess carrying forward up to five years.
- Never sell first. The entire benefit depends on transferring the shares themselves. Once you sell, the gain is realized and the advantage is gone.
How it actually works
The simplest route is a donor-advised fund (offered by Fidelity, Schwab, Vanguard, and others): you transfer shares in, take the deduction this year, and direct grants to charities over time. Alternatively, most established charities have a brokerage account and instructions for receiving stock transfers. Either way, start the transfer early in December — brokerage transfers can take a week or more, and the gift counts for the year it's received.