This piece was originally published on Benzinga on November 9, 2023.
If you are not the type of person who donates money to charity, you can skip this article. But if you are one of the 60 million American households who give to charity every year, there’s some bad news. You have probably been donating cash to charities and paying more than you need to in taxes.
Whether it is your children’s school, your place of worship, your alma mater, or a national cause-based charity, if you are using your bank account or credit card to make a donation, you are leaving money on the table.
The good news is, there is an easy way to solve this problem and save money on your tax bill. Donate stock (or mutual funds or ETFs) instead of cash to charity.
The Tax Benefits Of Donating Stock To Charity
When you donate to a charity, the IRS provides an amazing tax benefit. As long as the donation is to a qualified institution, you can deduct the full value of that donation against income. It’s one of the most valuable deductions in the tax code.
This is true whether you donate cash or stock, but when you donate appreciated assets, there is an additional benefit.
Not only do you get to deduct the current market value of the security, you also never have to pay capital gains taxes on it. This applies to any security you’ve held for more than one year (long-term) that has grown in value since you bought it.
The charity benefits too. If you sold the stock, you would have to pay the capital gains taxes, and you would have less money to give to the charity. When you donate the stock, the charity sells it and because it’s a tax-exempt organization, it doesn’t have to pay capital gains taxes either.
Running The Numbers
Let’s run through a simple example to illustrate how you can save thousands of dollars in taxes.
Imagine someone who regularly gives $20,000 per year to their children’s school. Unfortunately, they don’t know the benefits of donating stock, so instead they donate cash. Assuming a federal tax rate of 35% and a California tax rate of 9.3%, they would get a tax deduction of up to $8,860 for that donation.
But if they donated stock instead, they could save thousands of dollars more. Let’s say they had the good fortune to have purchased Apple stock (Ticker: AAPL) years ago at $100 per share, and today it’s trading at around $309. If they donated 64 shares of Apple stock instead, they would not only get the same charitable deduction as donating an equivalent amount of cash, but they would also avoid paying the $4,435 they would owe if they sold the stock instead.
In fact, if they still believe in the future of Apple stock, they don’t really have to give up that projected growth. Just use the $20,000 in cash that you would have given to the school, and use it to buy back the 64 shares of Apple. Their cost basis is now $309.35, and their portfolio will still benefit from any growth in Apple shares.
These tax benefits don’t just apply to stock. Any appreciated security has the same treatment, whether it is a stock, a mutual fund, an ETF, or even crypto. If you have shares of an index fund, like Vanguard Total Market (Ticker: VTI) that you’ve owned for years, you can donate those shares as well!
Daffy offers a free calculator that lets you compare the tax savings for donating stock versus cash for any publicly traded security.
Donor-Advised Funds Make It Simple To Donate Stock
There are two problems, however, that come up when you try to donate securities to charity.
First, most charities don’t accept securities as donations. In fact, out of the more than 1.7 million charities in the US, only a few thousand do. Second, most people do not want to give all of their securities to a single charity in a single year. Fortunately, donor-advised funds (like Daffy) solve both of these issues.
A good donor-advised fund (DAF) lets you donate stock any time and qualify immediately for a charitable tax deduction. The proceeds of the sale of the stock are invested, tax-free, in a portfolio that you select, and then anytime you want to make a donation to an operating charity, you make a simple recommendation. The fund then sends the money to the charity. It’s really that simple.
If you have never heard of a donor-advised fund, you are not alone. To date, they have mostly been marketed to ultra-wealthy clients through advisors and high-end accountants. DAFs have been around for decades, and are rapidly growing in popularity as a tax-advantaged account for charity. Not only are there over 3.5 million DAF accounts in the U.S. now, but they have grown rapidly since 2017.
Unfortunately, most donor-advised funds have high minimum balances and even higher fees, but there are now modern, low-cost options like Daffy that charge as little as $3 per month and no minimum contribution to open an account. Compare leading DAF providers to find the one that’s right for you.
Also, in November 2025, we introduced a one-of-a-kind feature called Custom Liquidation, which allows members to make a recommendation when they contribute stock on when and how to liquidate the donated securities. Members can recommend that the shares be held for a period of time, sold gradually, or liquidated immediately. Daffy now offers its members more flexibility for their charitable donations than any other donor-advised fund.
A Smarter Way to Give
Most people still give with cash, check, or credit card. However, a strategy that has been historically used by wealthy — donating appreciated stock to a donor-advised fund — is now available to any generous household in the U.S.
With Custom Liquidation, there is even more reason to consider it. You don’t have to choose between donating stock and maintaining your investment thesis. If you believe an asset still has room for growth, you can contribute it to Daffy and recommend that we hold it.
So the next time you’re thinking about giving, take a look at your portfolio first. You may be able to save on taxes, give more to charity, and do it with the assets you already own.
This tax estimate is based on a marginal federal income tax rate of 35% and a California marginal state tax of 9.3% as well as capital gains taxes of 20% on federal taxes, 9.3% on state taxes, and 3.8% NIIT. Please note that the information is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.