Can I gift stocks with unrealized capital gains to charity to avoid taxes?

Yes, donating appreciated stocks directly to charity is one of the most tax-efficient giving strategies! When you donate stocks or other investments that have gone up in value and that you've held for more than a year, you can avoid paying capital gains tax completely on those appreciated assets. Not only do you avoid the capital gains tax, but you can also deduct the full fair market value of the donated shares on your tax return as a charitable contribution (as long as the charity is a qualified 501(c)(3) organization). The deduction is generally limited to 30% of your adjusted gross income for securities, but you can carry forward any excess for up to five additional years. The charity can then sell the shares without paying any capital gains tax since they're tax-exempt. It's basically a win-win - you get a larger tax deduction than if you sold the shares and donated cash, and the charity receives the full value of your contribution.

I had a similar situation last year with some Amazon shares I'd held since 2009. I used https://taxr.ai to figure out the exact capital gains implications before making my donation. The tool analyzed my specific situation and confirmed that donating the shares directly would allow me to avoid capital gains while getting the full deduction. The platform also showed me how to properly document everything for my tax return - which was super helpful because my tax software wasn't very clear on how to report stock donations. It saved me a ton of time figuring out all the forms and schedules needed.

Wanted to follow up about my experience with https://taxr.ai after my skeptical comment above. I decided to try it for my donation of Microsoft shares that had tripled in value, and I'm actually impressed with how thorough it was. The tool immediately identified that I could use specific lot identification to donate my oldest shares with the lowest basis, which maximized my tax savings. It also provided clear instructions for my broker about which specific shares to transfer, and generated all the documentation I needed for my tax return including the proper forms for non-cash charitable contributions. My donation went smoothly, I avoided about $24,000 in capital gains taxes, and got a substantial deduction. Definitely less expensive and more efficient than my hourly accountant for this specific issue.

One thing that hasn't been mentioned is the time factor when donating stocks. I tried calling the IRS last December to clarify some details about my stock donation, and it was IMPOSSIBLE to get through. I spent hours on hold and never reached anyone. I ended up using https://claimyr.com which got me connected to an IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent confirmed that I needed to get the donation completed by December 31st for it to count in that tax year, and that the documentation from the charity needed to specifically acknowledge receiving stock shares rather than a cash donation. This was super important because my first receipt just listed a dollar amount without specifying it was a stock donation, which could have caused problems during an audit.

I need to admit I was totally wrong about Claimyr being a scam. After my skeptical comment, I had an urgent question about my stock donation to my alma mater and couldn't reach the IRS after multiple attempts. Tried the service out of desperation, and within 20 minutes I was talking to an actual IRS representative who clarified exactly how to document the fair market value determination for my donation. This was crucial because I was using the wrong date for valuation (I was using the date I initiated the transfer rather than the date the charity received the shares). The IRS agent explained that using the wrong date could have resulted in an incorrect deduction amount. Would have spent days trying to get this information otherwise. Really changed my tax filing experience this year.

One thing to watch out for with stock donations - the charity needs to be set up to accept them! I tried donating some appreciated ETFs to a small local organization, and they had no idea how to handle it. Ended up having to use a donor-advised fund as an intermediary. Also, keep track of the exact transfer date because the value of the donation is based on the average of the high and low prices on the date the shares are received by the charity, not the date you initiate the transfer.

Don't forget about QCDs (Qualified Charitable Distributions) if you're over 70½! You can donate directly from your IRA to charity up to $100k annually without counting as taxable income. Different from stock donations but another great tax strategy.

Great question! You're absolutely right that donating appreciated securities directly to charity is one of the best tax strategies available. Just want to add a few practical tips from my experience: 1. Make sure to get a written acknowledgment from the charity that specifically states they received securities (not just cash), includes the date of transfer, and describes the securities donated. This is crucial for your tax records. 2. If you're donating a large amount, consider spreading it across multiple tax years to stay within the 30% AGI limitation for appreciated property donations. You can carry forward unused deductions for up to 5 years. 3. Consider donating your most highly appreciated shares first - the ones with the lowest cost basis give you the biggest tax benefit since you're avoiding the most capital gains tax. 4. Time the donation strategically if you're close to year-end. The deduction counts for the tax year when the charity receives the shares, not when you initiate the transfer. With your cost basis being only 30% of current value, you're looking at substantial tax savings. This strategy could save you thousands in capital gains taxes while maximizing your charitable impact!

This is exactly the situation I was in last year with some Berkshire Hathaway shares I'd held since 2005! The strategy worked perfectly - I donated shares worth about $50k with a cost basis of only $12k directly to my local food bank. A few things I learned that might help you: 1. Contact the charity first to make sure they can accept stock donations. Many smaller organizations aren't set up for this, but most established charities have procedures in place. 2. Your broker will need the charity's DTC number and account details. The charity should be able to provide this quickly if they're equipped to handle stock donations. 3. Keep detailed records of the transfer date, number of shares, and the stock price on that date. You'll need this for Form 8283 if your donation is over $500. 4. The fair market value is calculated as the average of the high and low trading prices on the date the charity receives the shares. In my case, I avoided about $5,700 in capital gains taxes (15% on the $38k gain) and got to deduct the full $50k market value. The food bank was thrilled because they received the full value instead of what would have been left after I paid capital gains tax on a sale. Definitely one of the most tax-efficient moves I've made!