You may find that giving appreciated stock (held for more than one year) lets you make the biggest impact for the lowest cost. Consider the double tax benefit: 

• You qualify for an immediate income tax charitable deduction for the full value of the stock if you itemize.  

• You owe no capital gains tax on the appreciation.  

Note that your deduction for long-term appreciated stock is 30% of your adjusted gross income. Any excess deduction can be carried over for up to five years. 

Publicly traded stocks are the most commonly donated appreciated securities, but you could also give bonds, mutual fund shares, or closely held stock.

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Selecting the best stock to give

The best choice depends on your portfolio, investment goals, and tax situation. General guidelines indicate that you might consider a stock: 

• Held for more than one year (since that will allow you to deduct the full fair market value)

• With significant appreciation (since that will provide the strongest tax benefits)

• That will help you reposition your investments and rebalance your portfolio

• That lowered or cut its dividend​

 

OPTION 2—funding a life-income gift with appreciated stock

Another option is to use appreciated stock to fund a life-income gift, such as a charitable gift annuity or a charitable remainder trust. Benefits include:  

• You qualify for an income tax deduction (if you itemize) in the year of the gift.

• You create an income stream to supplement other sources of retirement income—income that is likely to be higher than any dividends you might be receiving from the stock.

• You may be able to reduce or spread out the payment of capital gains tax on the appreciation.