Does Donating Appreciated Stock to Charity Use Your Basis? (w/Examples) + FAQs

Quick Answer

No. When you donate stock you have held more than one year (long-term) to a public charity, you generally deduct its full fair market value on the gift date — not your cost basis — and you skip capital gains tax. But if you held the stock one year or less, your deduction is limited to your basis for tax year 2026.

Why “Basis” Trips Up So Many Donors

Most people assume the IRS lets them write off what they paid for their shares. That instinct is wrong for the most common gift — long-term appreciated stock — and being wrong here can cost you thousands in a missed deduction or an unexpected capital gains bill. The rule that decides everything is your holding period: how long you owned the shares before giving them away.

The stakes are real, and the calendar matters. Americans gave an estimated $592.5 billion to charity in 2024, with a large share flowing through non-cash gifts like securities, according to Giving USA’s annual report. Starting January 1, 2026, a new federal rule — the 0.5%-of-AGI floor created by the One Big Beautiful Bill Act — changes the math for everyone who itemizes, so the year you give now affects how much of your gift actually counts.

Here is what you will learn in this guide:

📈 When your deduction equals fair market value versus when it drops to your basis.
💸 How donating shares “in kind” erases the capital gains tax you would owe if you sold first.
📊 The 30%-of-AGI limit, the five-year carryforward, and the new 0.5% floor for 2026.
🧾 How to fill out Form 8283, value your shares, and avoid the appraisal trap.
⚠️ The seven costly mistakes that turn a smart gift into a tax headache.

This article reflects federal rules and general state guidance as of June 2026 and covers tax years 2025 and 2026. Tax law changes — confirm current figures before you file. It is educational and not a substitute for advice from a licensed CPA or tax attorney for your specific situation.

The Core Rule: Fair Market Value vs. Basis

Two terms drive this entire topic, so let me define them in plain words. Your basis is generally what you paid for the stock, including commissions. Fair market value (FMV) is what the stock is worth on the day you give it away. When stock has gone up in value, FMV is higher than basis — and the whole question is which number you get to deduct.

The federal law that controls this is Internal Revenue Code Section 170. The general rule is that you deduct FMV. But Section 170(e) carves out a major exception: if the stock would have produced ordinary income or short-term capital gain had you sold it, you must reduce your deduction by that gain — which, for short-term stock, knocks your deduction down to basis.

So whether basis matters depends entirely on your holding period and whether the stock gained or lost value. The consequence of getting this wrong is concrete. If you donate $50,000 of short-term stock thinking you can deduct the full $50,000, but your basis was $30,000, the IRS limits you to $30,000 — a $20,000 deduction you cannot claim. A common misconception is that “the charity got $50,000, so I deduct $50,000.” The charity’s receipt does not control your deduction; the tax rules do. What you should do: confirm your purchase date before you transfer shares, and if you are close to the one-year mark, wait until you cross it.

Long-Term Appreciated Stock: You Deduct FMV

If you have held the stock more than one year and it has gone up in value, you hit the sweet spot. You deduct the full fair market value, and you never pay capital gains tax on the appreciation. The IRS explains this in Publication 526, which governs charitable contributions.

The consequence of using this strategy is a “double tax break”: a deduction for the full value and avoidance of the capital gains tax you would owe if you sold. For example, Maria bought Apple shares for $4,000 that are now worth $20,000. If she sells, she owes tax on the $16,000 gain. If she donates the shares instead, she deducts $20,000 and pays no capital gains tax. The misconception here is that you must sell first and donate cash — doing so triggers the very tax the in-kind gift avoids. What to do: ask your broker to transfer the shares directly to the charity’s brokerage account, never sell them yourself first.

Short-Term Stock: Your Deduction Drops to Basis

If you held the stock one year or less, it is short-term capital gain property. Under Section 170(e), your deduction is limited to your basis — the lower of cost or FMV, in practice your cost when the stock has risen. The nonprofit law analysis of Section 170 confirms short-term gain property is treated like cash or ordinary income property for this purpose.

The consequence is a smaller write-off and a worse AGI limit. For example, David bought stock for $8,000 eleven months ago; it is now worth $14,000. If he donates now, he deducts only $8,000 and forfeits the $6,000 of appreciation. The misconception is that appreciation always counts — it does not until the one-year clock passes. What to do: if the gift is not urgent, hold the shares until you cross the 12-month line, then donate to unlock full FMV.

Stock That Lost Value: Basis Does Not Help You

If your stock is worth less than you paid, donating it is usually the wrong move. Your deduction is limited to the lower FMV, and you lose the capital loss you could have claimed by selling. The IRS in-kind contribution guidance confirms a loss position is simply deducted at FMV, with no loss benefit.

The consequence is doubly bad: a small deduction and a wasted loss. For example, if Sarah’s shares cost $10,000 but are now worth $6,000, donating them gives only a $6,000 deduction and zero capital loss. The better path is to sell the stock, claim the $4,000 capital loss, and donate the $6,000 cash. What to do: never gift a losing position in kind — sell first, harvest the loss, then give the proceeds.

Which Situation Applies to You?

Your answer depends on three facts: how long you held the stock, whether it gained or lost value, and what type of charity receives it. Use this branch to find your case.

Held more than 1 year, gained value, gift to public charity: Deduct full FMV, capped at 30% of AGI. This is the ideal scenario.
Held 1 year or less, gained value: Deduct only your basis, capped at 50% of AGI (60% rule applies to cash). Consider waiting to cross 12 months.
Stock lost value (any holding period): Sell it, claim the capital loss, then donate the cash. Do not gift in kind.
Gift to a private non-operating foundation: Long-term publicly traded stock is still deductible at FMV, but the AGI cap drops to 20%. Non-publicly-traded stock to a private foundation is limited to basis.
You take the standard deduction: A stock gift gives you no federal income-tax benefit, because the deduction is itemized only. Consider “bunching” gifts into one year.

How the AGI Limits Work for Stock Gifts

Even when you deduct FMV, you cannot deduct an unlimited amount in one year. For long-term appreciated stock given to a public charity, the deduction is capped at 30% of your adjusted gross income (AGI) for both 2025 and 2026, per Daffy’s charitable deductions guide. Cash gifts get a higher 60% cap, which is why the asset type matters.

The consequence of exceeding the cap is not lost value — it is delay. Any amount above 30% of AGI carries forward for up to five years, as Convoy of Hope’s stock donation guide explains. For example, if your AGI is $100,000 and you donate $40,000 of long-term stock, you deduct $30,000 this year and carry $10,000 forward. A common misconception is that the excess is gone forever; it is not, as long as you have future income to absorb it. What to do: track your carryforward on a separate worksheet each year so you do not forget it.

The cap also changes with the charity type. Gifts of long-term publicly traded stock to a private non-operating foundation are limited to 20% of AGI, a sharper cap that catches many wealthy donors off guard. The Cornell summary of Section 170 lays out these tiers. What to do: confirm whether your recipient is a public charity, a donor-advised fund sponsor, or a private foundation before you decide how much to give.

The 2026 Game-Changer: The 0.5% AGI Floor

Starting January 1, 2026, the One Big Beautiful Bill Act (OBBBA) adds a new hurdle for itemizers. Only the portion of your total charitable contributions that exceeds 0.5% of your AGI is deductible, according to DAFgiving360’s tax law summary. This is a permanent change, not a temporary one.

The consequence is that your first slice of giving each year produces no deduction. For example, the Taft Law 2026 outlook shows a donor with $400,000 AGI who gives $20,000 loses the deduction on the first $2,000 (0.5% of AGI) and deducts only $18,000. Note that sources disagree on scope: some, like Deductable’s analysis, read the floor as applying to cash only, while the Alston advisory reads it as applying to both cash and noncash gifts. The IRS has not issued final guidance resolving this, so treat your stock gift as potentially subject to the floor and confirm before filing.

A second OBBBA change caps the value of itemized deductions at 35% for top-bracket taxpayers, trimming the benefit for those in the 37% bracket. What to do: if you are a large donor, consider whether to accelerate or “bunch” gifts, and ask your CPA how the floor and the 35% cap interact with your stock gift for 2026.

Common Donor Scenarios

These three scenarios show how the rules play out with real numbers.

Donor Situation	Tax Result for 2026
Held 5 years, $10,000 cost, $40,000 value, gift to public charity, $150,000 AGI	Deduct $40,000 FMV (under the $45,000 30%-AGI cap), pay $0 capital gains tax, lose only the first 0.5% of AGI to the floor
Held 8 months, $12,000 cost, $18,000 value	Deduct only $12,000 basis; the $6,000 gain is not deductible; better to wait past 12 months
Held 3 years but stock fell from $20,000 to $14,000	Deduct only $14,000 FMV; better to sell, claim the $6,000 loss, and donate $14,000 cash

Three Named Examples Worked in Full

Example 1 — Maria, the long-term winner. Maria, in the 32% federal bracket, owns stock she bought for $4,000 that is now worth $20,000 after six years. She donates the shares in kind to a public charity. She deducts the full $20,000 FMV, saving roughly $6,400 in income tax. She also avoids the 15% capital gains tax on her $16,000 gain — about $2,400. Her total benefit is near $8,800, versus only the income-tax savings had she sold first.

Example 2 — David, the short-term donor. David bought stock for $8,000 eleven months ago; it is now worth $14,000. Because his holding period is under one year, Section 170(e) limits his deduction to his $8,000 basis. The $6,000 of appreciation is simply lost as a deduction. If David waits one more month to cross the 12-month line, his deduction jumps to the full $14,000 FMV.

Example 3 — Sarah, the loss position. Sarah’s shares cost $10,000 but are now worth $6,000. If she donates in kind, she deducts only $6,000 and gets no loss benefit. Instead, she sells the shares, claims a $4,000 capital loss that offsets other gains, and donates the $6,000 cash. She walks away with a $6,000 deduction plus a $4,000 loss — a far better result.

How to Donate Stock: Step by Step

Donating stock is a process with deadlines, and the mechanics decide whether you keep your tax break. Follow these steps.

Confirm your holding period and gain. Check your purchase date and cost basis from your brokerage statement before you do anything else.
Pick a qualified charity. It must be a 501(c)(3); verify it using the IRS Tax Exempt Organization Search.
Get the charity’s transfer instructions. Ask for its brokerage account and DTC number so shares move “in kind.”
Transfer the shares directly — do not sell first. Selling triggers the capital gains tax the in-kind gift avoids.
Document the gift date. The deduction value is the average of the high and low trading price on the date the shares leave your control.
Get a written acknowledgment. Any gift of $250 or more needs a contemporaneous written acknowledgment from the charity.
File the right forms. Report the gift on Schedule A and, if over $500, on Form 8283.

The deadline is December 31 for a gift to count in that tax year, and stock transfers can take days or weeks — start no later than mid-December. The cost is usually just brokerage fees; a DIY transfer is free of professional cost, while a complex gift may warrant a CPA at $200–$500 per hour.

Filling Out Form 8283 for Stock Gifts

If your total non-cash gifts for the year exceed $500, you must file IRS Form 8283, Noncash Charitable Contributions, with your return. The Convoy of Hope guide confirms this threshold for stock.

Publicly traded stock goes in Section A of Form 8283, because it does not require a qualified appraisal — its value is the public market price. You list the charity’s name, the description of the securities, the date of the gift, your cost basis, the FMV, and how you valued it. The consequence of skipping Form 8283 is denial of the entire deduction, even if the gift was legitimate. What to do: keep your brokerage transfer confirmation and the date-of-gift price as backup.

The big trap is non-publicly-traded stock (such as private company shares). Gifts of such stock over $5,000 require a qualified appraisal and completion of Section B, signed by the appraiser and the charity. The misconception is that all stock skips the appraisal rule — only publicly traded stock does. For guidance on valuing donated property, see IRS Publication 561. If you are also reporting sales, our guide on filling out Form 8949 and Schedule D walks through capital gains reporting.

Federal vs. State: Does Your State Follow These Rules?

The rules above are federal. Whether your state gives you the same break depends on its conformity to federal law, and this varies sharply. Always treat the federal rule as your baseline, then check your state separately.

Many states that allow itemized deductions, such as California, generally follow the federal FMV-versus-basis treatment and the AGI percentage limits, though California does not automatically adopt every new federal provision like the OBBBA floor. States with no income tax — including Florida, Texas, Washington, and Nevada — offer no state charitable deduction at all, because there is no state income tax to reduce. Some states, like New Jersey, do not allow a charitable deduction even though they tax income. What to do: search your state’s Department of Revenue page for “charitable contribution deduction” and confirm whether it conforms to the 2026 OBBBA changes, since most states have not yet ruled on the new floor.

Mistakes to Avoid

Selling the stock first, then donating cash. This triggers capital gains tax you could have avoided entirely.
Donating short-term stock expecting FMV. Your deduction is capped at basis, losing the appreciation.
Gifting losing stock in kind. You forfeit the capital loss; sell first instead.
Skipping Form 8283 on gifts over $500. The IRS can deny your entire deduction.
Forgetting the written acknowledgment for gifts of $250+. Without it, the deduction is disallowed.
Ignoring the 30%-of-AGI cap. You may over-claim and trigger an IRS adjustment instead of carrying forward.
Missing the December 31 transfer deadline. A late transfer pushes the deduction into the next tax year.
Assuming your state matches federal. A no-deduction or non-conforming state can erase your expected state savings.

Do’s and Don’ts

Do confirm your holding period is over one year before transferring, because it unlocks full FMV.
Do transfer shares in kind, because it avoids capital gains tax on the appreciation.
Do keep the date-of-gift price and transfer confirmation, because they support your reported value.
Do track carryforwards, because excess over 30% of AGI is usable for five years.
Do start the transfer by mid-December, because stock moves can take weeks.
Don’t donate stock you held a year or less, because the deduction shrinks to basis.
Don’t gift a loss position, because you waste the deductible capital loss.
Don’t skip Form 8283, because it costs you the whole deduction.
Don’t assume the OBBBA floor excludes stock, because guidance is unsettled.
Don’t give to a private foundation without checking the 20% cap, because it limits your annual deduction.

Pros and Cons of Donating Appreciated Stock

Pro: You deduct full FMV, because long-term gifts escape the Section 170(e) basis reduction.
Pro: You avoid capital gains tax, because you never realize the gain.
Pro: Excess deductions carry forward five years, because the 30% cap delays rather than destroys value.
Pro: You can give more for the same after-tax cost, because two tax breaks stack.
Pro: It simplifies estate and portfolio rebalancing, because you remove concentrated positions tax-free.
Con: The 30%-of-AGI cap is lower than the 60% cash cap, because asset gifts are limited more tightly.
Con: The 2026 floor reduces small gifts, because the first 0.5% of AGI is non-deductible.
Con: Only itemizers benefit, because the standard deduction wipes out the value otherwise.
Con: Private-stock gifts need a costly appraisal, because Section B requires it over $5,000.
Con: Losing positions waste the loss, because in-kind gifts forfeit capital loss harvesting.

What to Do Next

Pull your brokerage statement and confirm each lot’s purchase date and cost basis.
Separate winners from losers — gift long-term winners in kind, sell losers for the loss.
Verify your charity on the IRS Tax Exempt Organization Search and request transfer instructions.
Initiate the in-kind transfer by mid-December to meet the December 31 deadline.
Gather records — the written acknowledgment, the date-of-gift price, and your basis.
Complete Form 8283 Section A for publicly traded stock and attach it to your return.
Call a CPA or tax attorney if you are donating private-company stock, giving above 30% of AGI, or have AGI high enough for the 2026 floor and 35% cap to bite.

Frequently Asked Questions

Does donating appreciated stock use my basis or fair market value? Fair market value, if you held the stock more than one year and gift it to a public charity. You deduct the full market value on the gift date and avoid capital gains tax for tax year 2026.

When is my stock deduction limited to basis? When you held the stock one year or less. Short-term capital gain property is reduced to basis under Section 170(e), so the appreciation is not deductible.

Do I pay capital gains tax when I donate stock? No. Donating long-term appreciated shares in kind avoids the capital gains tax you would owe if you sold them first, which is the main advantage of the strategy.

What is the AGI limit for donating appreciated stock? 30% of AGI for long-term stock to a public charity in 2025 and 2026. Excess carries forward up to five years; gifts to private foundations are capped at 20%.

Do I need Form 8283 to donate stock? Yes, if your total non-cash gifts exceed $500. Publicly traded stock goes in Section A and does not require a qualified appraisal.

Does the new 0.5% floor apply to stock gifts in 2026? Possibly. Guidance is unsettled — some sources say the floor hits cash only, others say cash and noncash. The IRS has not finalized this, so confirm before filing.

Should I donate stock that lost value? No. Sell it first to claim the capital loss, then donate the cash. Gifting a loss position in kind wastes the deductible loss.

Can I deduct a stock gift if I take the standard deduction? No. The charitable stock deduction is an itemized deduction, so you must itemize on Schedule A to get any federal benefit from it.

How do I value the donated stock? The average of the high and low trading price on the gift date. Multiply that average by the number of shares transferred to get fair market value.

Does my state give me a deduction for donated stock? It depends on your state. No-income-tax states give none; conforming states like California generally follow federal rules; some, like New Jersey, allow no charitable deduction.

What happens if my gift exceeds the 30% AGI limit? You carry the excess forward for up to five years. You deduct up to 30% of AGI this year and apply the rest against future income within the carryforward window.

Can I donate private company stock the same way? Yes, but with extra steps. Gifts over $5,000 require a qualified appraisal and Form 8283 Section B, and private-foundation gifts of such stock are limited to basis.

Related reading