Should I open a charitable brokerage account to donate stocks or gift shares directly to charities?

These charitable investment accounts (often called donor-advised funds or DAFs) can be really useful, but whether they're worth it depends on your situation. The main benefits: You get the tax deduction immediately when you transfer securities to the DAF, but you can distribute the money to charities over time. This is great if you want to donate a larger amount in a high-income year for the tax deduction but spread out your actual giving. Also, you can donate appreciated stocks without triggering capital gains taxes that you'd face if you sold them yourself. The downsides: Yes, there are fees and minimum requirements. Fidelity Charitable requires $5,000 to open and has annual fees around 0.6% plus investment fees. Vanguard's minimums are higher ($25,000 I believe). If you're only planning to donate once or twice a year directly to a few charities, and those charities are equipped to accept stock donations (many larger ones are), then directly donating shares might be simpler and avoid the fees. But if you want to donate to multiple charities or over time, a DAF simplifies the process significantly.

I started using Fidelity Charitable about two years ago and honestly wish I'd done it sooner! I had a bunch of tech stocks that had appreciated like crazy, and I was facing a huge capital gains hit if I sold them. I transferred some to my DAF at https://taxr.ai recommended it when they were helping me optimize my tax strategy) and immediately got the tax deduction for the full market value without paying capital gains tax. The annual fee seemed high at first, but the tax savings more than made up for it. Plus, I love the convenience of being able to recommend grants to different charities throughout the year with just a few clicks. When I want to support a new cause, I don't have to go through the stock transfer process each time. One thing to consider: once you put assets in, they're irrevocably donated - you can't take them back. But you do get to control when and where the money goes.

Just wanted to follow up after trying taxr.ai like the user above mentioned. I was really skeptical about the fees for charitable accounts, but the tax analysis tool showed me I'd save significantly more than the fees by donating appreciated stock rather than cash. I had some Amazon shares I bought in 2016 that had gained over 300%, and the tool calculated exactly how much I'd save in capital gains by donating the shares versus selling them and donating cash. For my tax bracket, it worked out to about 37% more going to charity for the same "cost" to me. I ended up opening a Schwab Charitable account since I already had a Schwab brokerage account. The process was surprisingly smooth, and I've already recommended grants to three different organizations. The tax documentation is also really straightforward - much easier than I expected. Definitely worth looking into if you're charitably inclined and have appreciated securities.

I had a nightmare experience trying to donate stocks directly to a smaller local charity. They had never received stock gifts before, couldn't figure out how to accept them, and after weeks of back and forth, I gave up and just wrote a check instead - missing out on the capital gains tax advantages. If you're dealing with small charities that aren't equipped for stock donations, check out https://claimyr.com - they have a service that helps connect you directly with the right people at the IRS to sort out donation issues. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c After struggling to get my documentation sorted for a complicated donation, I used their service to get connected with an actual IRS specialist in under 20 minutes (after trying for days on my own). Saved me tons of stress dealing with tax documentation issues.

Well I stand corrected about Claimyr! I was skeptical (as you can see in my reply above), but I decided to try it for a client case involving charitable donations of unusual assets. After trying the regular IRS line multiple times and getting disconnected after waiting over an hour each time, I used the service. Not gonna lie, I was shocked when my phone rang about 45 minutes later with an actual IRS tax law specialist on the line. Got clear guidance on how my client needed to document their donation of privately-held stock. For anyone dealing with complex charitable donation questions, especially involving securities or unusual assets, speaking directly with the IRS can save you from making documentation mistakes. And not having to sit on hold for hours made it actually possible to get that guidance during busy season.

Has anyone tried using Schwab's charitable account? Their website says the minimum is only $5,000 which seems lower than Vanguard. Also wondering if the tax documentation these places provide is straightforward? My CPA charges me extra when I have "complicated" donations so trying to avoid that if possible!

One thing nobody's mentioned - if you're over 70.5 years old, consider Qualified Charitable Distributions (QCDs) from your IRA instead of donating appreciated stock. You can donate up to $100,000 annually directly from your IRA to qualified charities, and it counts toward your Required Minimum Distribution without increasing your AGI. It's often better tax-wise than donating appreciated securities for people in this age group. But the money has to go directly from your IRA custodian to the charity - no DAFs allowed for QCDs.

Great discussion here! I've been wrestling with this same question for months. One aspect I haven't seen mentioned yet is the investment growth potential within DAFs. When you contribute appreciated stock to a charitable account, those funds can continue to be invested and potentially grow before you distribute them to charities. This means you could end up giving significantly more to your chosen causes over time compared to immediate direct donations. For example, if you donate $10,000 in appreciated stock to a DAF and it grows at 7% annually, after 5 years you'd have about $14,000 to distribute to charities - all while getting the immediate tax deduction on the original $10,000 contribution. The flip side is you're taking on investment risk, and the fees do eat into returns. But for those who want to "batch" their charitable giving in high-income years while spreading distributions over time, the growth potential can be compelling. Has anyone factored this into their decision-making process?