Charitable Giving
The voluntary donation of money, assets, or time to qualified nonprofit organizations, often providing income tax deductions.
What is Charitable Giving?
Charitable giving involves transferring money, securities, real estate, or other assets to qualified nonprofit organizations (501(c)(3) entities under US tax law) with no expectation of financial return. Cash donations to qualified charities are deductible up to 60% of Adjusted Gross Income (AGI) for itemizers; donations of appreciated securities are deductible at fair market value (up to 30% of AGI) while avoiding capital gains tax on the appreciation — making stock donations one of the most tax-efficient giving strategies. Donors who do not itemize can still benefit through qualified charitable distributions (QCDs) from IRAs if age 70½ or older. High-net-worth donors often use donor-advised funds (DAFs), charitable remainder trusts (CRTs), or private foundations to optimize timing, tax efficiency, and philanthropic impact.
Example
An investor owns 500 shares of Apple stock with a cost basis of $10 per share (now worth $185 per share), representing $91,000 in unrealized gain. Donating the shares directly to a donor-advised fund generates a $92,500 charitable deduction (full fair market value) while avoiding $13,650 in capital gains tax (15% rate on $91,000 gain). Selling first and donating cash would generate only a $78,850 net donation after paying the tax — a $13,650 difference that makes direct stock donation the superior strategy.