Donating stock directly to charity is one of the most tax-smart ways to give. Yet it is often not well understood or widely used.
By donating stock that has appreciated for more than a year, you are actually giving much more than you would be if you sold the stock and then made a cash donation. The reason is simple: avoiding capital gains taxes.
If you donate the stock directly to a charity, you will not incur any capital gains tax. Additionally, you are still eligible to deduct the full fair-market value of the asset you donated from your income taxes, up to the overall amount allowed by the IRS.
And remember that your appreciated assets can also include assets that are not publicly traded, like restricted stock or bitcoin.
Qualified charitable distributions (QCDs) of up to $100,000 annually from IRAs have been available for donors since the Pension Protection Act of 2006. With a QCD, eligible donors age 70 ½ or older have been able to avoid income tax they would have otherwise paid on required minimum distributions (RMDs).
Beginning in 2023, donors could make a one-time election to fund a charitable gift annuity or charitable remainder trust with up to $50,000 from an IRA. Payments can be made only to the donor and/or spouse.
As part of the Secure 2.0 Act of 2022, both the QCD limit and the amount eligible for gift annuities and remainder trusts are adjusted for inflation. For 2025, the QCD maximum is $108,000, and the amount eligible for gift annuities and remainder trusts is $54,000.
A Higher RMD Can Mean More Taxes
With many financial markets enjoying highs, RMDs have increased for many Americans. One tax strategy for those 73+ is to make QCDs, which can count towards your required distribution for 2025 and are not considered part of your taxable income.
For more information, please contact your tax advisor.
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