Give the Stock, Not the Check: Using a Donor-Advised Fund With Appreciated Stock

Writing a check is probably the simplest way to support a charity. It may also be one of the more expensive ways to give.

If you own stock that has appreciated significantly, donating the shares instead of selling them can potentially accomplish two things at once:

• You may qualify for a charitable deduction based on the stock’s fair market value.
• You generally avoid recognizing the embedded capital gain on the donated shares.

A donor-advised fund, or DAF, can make the strategy easier to administer, particularly if you support several charities, want to bunch multiple years of giving into one tax year, or are looking for a charitable exit from a concentrated stock position.

The tax code does not contain many pleasant surprises. This is one of the less hostile sections.

A $50,000 Illustration

Assume you own publicly traded stock worth $50,000 with a cost basis of $10,000. You have held the shares for more than one year, so the position has a $40,000 long-term capital gain.

Also assume you are subject to the 20% federal long-term capital-gains rate and the 3.8% Net Investment Income Tax.

The example does not include state taxes. If you live in a state that taxes capital gains, selling the stock may produce additional tax and increase the difference between the two approaches. State treatment varies, because fifty sets of rules apparently seemed preferable to one.

Option 1: Sell the stock, pay the tax, and donate what remains

Selling the stock realizes the $40,000 gain.

Calculation	Amount
Stock value	$50,000
Cost basis	$10,000
Long-term capital gain	$40,000
Federal capital-gains tax at 20%	$8,000
Net Investment Income Tax at 3.8%	$1,520
Total estimated federal tax	$9,520
Cash remaining for charity	$40,480

After paying the estimated federal tax from the sale proceeds, you would have $40,480 available to donate.

Assuming you itemize and otherwise qualify, the cash contribution could produce a potential charitable deduction of $40,480 before applying the 2026 deduction floor and other limitations.

The government receives $9,520. The charity receives $40,480. Everyone receives paperwork.

Option 2: Contribute the stock to a donor-advised fund

Instead of selling the shares, you transfer them directly to an eligible DAF sponsor.

Calculation	Amount
Value of stock contributed	$50,000
Capital gain recognized by you	$0
Federal capital-gains tax generated by the contribution	$0
Amount available for charitable purposes, before fees or market movement	$50,000
Potential charitable deduction before applicable limitations	$50,000

The DAF sponsor can generally sell the shares without creating the same federal capital-gains tax for you. The resulting cash can then be invested or granted to eligible charities based on your recommendations.

Compared with selling the stock and donating the after-tax proceeds, contributing the shares makes an additional $9,520 available for charitable purposes.

You could sell the stock and still give $50,000 in cash, but you would need to find another $9,520 to pay the federal tax generated by the sale. This is the scenic route.

The illustration also assumes the shares are publicly traded, have been held for more than one year, and are accepted by the DAF sponsor. Actual tax results depend on income, holding period, itemization status, deduction limits, the 2026 charitable-deduction floor, and other facts.

How a Donor-Advised Fund Works

A donor-advised fund is an account maintained by a sponsoring charitable organization. Schwab’s DAFgiving360, formerly Schwab Charitable, and Fidelity Charitable are two popular sponsors, but there are plenty of others.

You contribute cash, stock, or other eligible assets to the sponsoring organization and may be eligible to claim a charitable deduction in the year of the contribution. The sponsor can then sell the contributed stock, invest the proceeds, and make grants to eligible charities based on your recommendations.

Assets invested inside the DAF can grow free of federal income and capital-gains tax. Any growth remains in the charitable account and can support future grants. You cannot withdraw it for personal use, even if a particularly compelling kitchen renovation presents itself.

The contribution and grant decisions can occur at different times. You might contribute $100,000 of appreciated stock in 2026 and recommend $20,000 of grants annually over the following five years.

The potential deduction relates to the contribution to the DAF in 2026. The later grants do not produce additional deductions, although they may produce additional thank-you letters.

A DAF is often described as a charitable investment account. Legally, the sponsoring organization owns the assets once they are contributed. The gift is irrevocable. You retain advisory privileges regarding investments and grants, but you no longer own the money.

You can recommend grants and investments, but the sponsoring organization has final legal control.

Giving Becomes Easier to Organize

A DAF can simplify the administrative side of charitable giving.

Without one, you might send stock to one organization, write a check to another, make an online donation to a third, and then search your email the following April using increasingly desperate combinations of the words “gift,” “thank you,” and “tax.”

With a DAF, much of that activity can be managed from one account.

Most DAF platforms let you:

• Review your contribution and grant history in one place.
• See which organizations received grants and when.
• Recommend grants to multiple charities from the same pool of assets.
• Schedule recurring monthly, quarterly, or annual grants.
• Give anonymously when appropriate.
• Download account records for tax preparation and family discussions.

The DAF sponsor generally provides the acknowledgment for your contribution to the fund. Grants subsequently made from the DAF do not create new deductions, so the grant history is primarily an organizational record.

Your April self may still have tax documents to gather, but charitable receipts are less likely to require digital archaeology.

Recurring grants can be especially useful for organizations you support every year.

Pro tip: Schedule the annual grant to your alma mater near the beginning of its fiscal year. The development office may then stop reminding you that you have not yet donated. This is not guaranteed. Universities have sophisticated databases and deep institutional confidence that you might like to give twice.

When a DAF May Be Useful

You do not need a donor-advised fund to give appreciated stock. If you want to make one substantial gift to a large organization with an established securities-gifting process, transferring the shares directly may be perfectly sensible.

A DAF becomes more useful when:

• You support several charities.
• Some of those charities cannot easily accept securities.
• You want to make one stock contribution and distribute the proceeds among multiple organizations.
• You want to make the contribution this year but decide on individual grants later.
• You want to bunch several years of giving into one tax year.
• You want to establish a recurring or multigenerational approach to family giving.
• You want to separate charitable decisions from the daily movement of a concentrated stock position.

The DAF sponsor handles the stock sale and sends cash grants to the recipient organizations. That can be considerably easier than asking five local nonprofits to open brokerage accounts so they can each receive a carefully calculated sliver of CompanyCo.

DAFs are not free, of course. They may have administrative fees, investment expenses, minimum grant amounts, and restrictions on eligible recipients. If you intend to give everything immediately to one organization, adding another account and another set of rules may be more architecture than the project requires.

Bunching Gifts Under the 2026 Rules

Bunching has traditionally been presented as a strategy for exceeding the standard deduction. Instead of donating $20,000 every year, a household might contribute $60,000 to a DAF in one year, itemize its deductions that year, and take the standard deduction during the next two years.

That remains relevant. For 2026, the federal standard deduction is:

• $16,100 for single filers
• $32,200 for married couples filing jointly
• $24,150 for heads of household

Beginning in 2026, itemizers also face a new charitable-deduction floor. The tax code has added a cover charge.

The new 0.5%-of-AGI floor

Only charitable contributions exceeding 0.5% of adjusted gross income are potentially deductible as an itemized deduction.

Suppose a household has $500,000 of AGI. Its annual floor is $2,500.

If the household gives $20,000 in each of three separate years and its AGI remains constant, the first $2,500 is nondeductible each year. That leaves $17,500 potentially deductible annually, or $52,500 over three years, before considering other limitations.

If the household instead contributes $60,000 to a DAF in one year, the floor applies once. As much as $57,500 may remain potentially deductible before considering other limitations. The household can then recommend grants from the DAF over the same three-year period.

Three annual floors have become one. This is about as exciting as a floor can reasonably get.

Bunching does not automatically produce a better result. AGI, other itemized deductions, the standard deduction, contribution limits, and future tax-law changes all affect the calculation. But the new floor gives charitably inclined households another reason to consider the timing of their contributions instead of repeating the same transaction every December and hoping Schedule A is feeling generous.

High-income years can create an opportunity

Bunching is often most useful during an unusually high-income year. Examples might include:

• A business sale
• A large bonus
• A substantial stock-option exercise
• A major vesting event
• An initial public offering or other liquidity event
• A particularly large Roth conversion

Hello, SpaceX IPO.

A high-income year may create a larger tax liability and more capacity under the percentage-of-AGI limits for charitable deductions. It may also be the year in which a household has a newly liquid or highly appreciated asset available to contribute.

The timing still requires care. Lockups, trading restrictions, holding periods, pending transactions, and valuation rules can all matter. A large number on a brokerage statement is not the same thing as unrestricted stock ready for transfer. Restrictions can turn a seemingly simple gift into a planning project.

A DAF can support giving for many years

Under current federal law, an individual DAF account generally does not have a fixed annual payout requirement.

A private nonoperating foundation generally must make qualifying distributions based on roughly 5% of its noncharitable-use assets each year. A private foundation comes with more control, more administration, annual tax filings, and homework.

A DAF sponsor may have its own minimum-grant, activity, or inactive-account policies. Subject to those policies, a donor can make a large contribution in one year and recommend grants gradually over many years.

The remaining assets can stay invested and grow free of federal income and capital-gains tax within the charitable account. Market losses, fees, and investment expenses can still reduce the amount available. The market does not become more cooperative merely because the money has charitable intentions.

A family can use this structure to create something resembling a small charitable endowment without forming and administering a private foundation. It is not legally an endowment, and the sponsoring organization retains control of the assets. The family contributes a pool of capital, invests it, and recommends grants over time.

A household might contribute $500,000 during an unusually high-income year, then recommend grants of $25,000 or $30,000 annually for many years. There is no federal requirement that the entire contribution be granted immediately simply because the deduction occurred immediately.

A contribution can therefore fund annual grants for a long time, depending on investment performance and the sponsor’s rules. There is no prize for emptying the account by December 31.

A smaller benefit in the highest tax bracket

The 2026 rules also limit the tax benefit of itemized deductions for taxpayers in the 37% federal bracket. The limitation effectively reduces the maximum federal benefit to 35 cents for a dollar of deduction that would otherwise offset income taxed at 37%.

The contribution is still included when calculating itemized deductions. The federal tax benefit is simply not as large as multiplying the deduction by 37%.

Avoiding the embedded capital gain remains a separate potential benefit. The calculation should not assume that every $1 deduction saves a top-bracket donor $0.37.

The IRS has selected $0.35. It did not circulate a survey.

The new non-itemizer deduction does not apply to DAFs

Beginning in 2026, taxpayers who do not itemize may deduct up to $1,000 of qualifying cash contributions, or $2,000 for married couples filing jointly.

That provision applies only to cash gifts made to certain qualified operating charities. Contributions to donor-advised funds do not qualify.

A household using the standard deduction could make qualifying cash gifts directly to operating charities and use a DAF for a separate, larger bunching strategy. Every charitable dollar may serve the same broad purpose, but the tax code insists on sorting them into different containers.

Deduction Limits for Cash and Stock

The amount of a charitable contribution and the amount deductible in the current year are not always the same number. The applicable limit depends on what you contribute, how long you have owned it, the type of organization receiving it, and the other charitable contributions made during the year.

For contributions to eligible public charities, including many DAF sponsors, the general limits are:

• Cash: Generally deductible up to 60% of AGI.
• Long-term appreciated securities: Generally deductible at fair market value up to 30% of AGI.
• Short-term appreciated securities: Generally deductible at the lower of cost basis or fair market value, usually subject to a limit of 50% of AGI when donated to a qualifying public charity.

For example, suppose you bought stock for $40,000 and it increased to $50,000 after six months. Donating it at that point would generally produce a contribution measured at the $40,000 basis rather than the $50,000 market value.

Waiting until the shares qualify as long-term capital-gain property may improve the deduction, assuming holding the position remains appropriate and the stock price cooperates. The stock market is not obligated to preserve your charitable tax strategy while you wait for the anniversary.

These limits interact with one another. Large cash gifts can affect the room available for securities contributions, and carryovers from prior years can further complicate the order of deductions. The percentage limits are best viewed as ceilings, not promises.

If a contribution exceeds the applicable AGI limit, the unused deduction can generally be carried forward for up to five additional tax years. It remains subject to its original percentage category and the limits applicable in the carryforward year.

Any amount still unused after the five-year carryforward period generally expires. The tax code gives you five more attempts and then loses interest.

Charitable Giving and Concentrated Stock

A concentrated position creates two problems that frequently get tangled together: investment risk and taxes.

Selling reduces the risk but recognizes the gain. Continuing to hold the entire position postpones the tax but leaves the risk in place. As discussed in our article on managing concentrated stock positions, charitable giving can provide another path for the portion of the position you genuinely intend to give away.

The important qualification is “genuinely.”

Giving away $100 to save $35 is still a net reduction in personal wealth of $65. A charitable deduction does not make philanthropy profitable. Congress has not created a perpetual-money machine, at least not in this particular subsection.

For someone who already gives $25,000 annually and owns a large low-basis position, contributing several years of planned giving to a DAF can reduce the concentrated holding without creating the capital-gains tax that a sale would generate. The remaining position can then be addressed through scheduled sales, tax-loss harvesting, direct indexing, or other diversification strategies.

A DAF can address the charitable portion of a concentrated position. The rest of the shares still require a plan. They will not diversify themselves out of gratitude.

When Giving Stock May Be a Poor Fit

Cash or another asset may be more appropriate when:

• The stock has declined below its cost basis. Selling it may allow you to recognize a loss before donating the cash.
• You have held the appreciated shares for one year or less.
• You need the stock or sale proceeds to support your own financial plan.
• The contribution would exceed the applicable AGI limits without a useful carryforward plan.
• The position is restricted, privately held, subject to a trading window, or connected to a pending transaction.
• You are not comfortable making an irrevocable charitable contribution.
• The DAF’s fees or restrictions outweigh its administrative benefits.
• You want the charity to receive the gift immediately and it can accept the securities directly.

Private-company stock, restricted securities, and business interests require substantially more advance planning. The receiving organization must be willing and able to accept the asset, valuation requirements may apply, and a pending sale can create additional tax questions.

Those are not December 30 projects unless your preferred holiday tradition is exchanging urgent emails with attorneys.

Questions Worth Answering Before You Transfer the Shares

The amount you want to give is only one part of the decision. The rest of the financial plan matters too:

• Which asset should fund the gift?
• When should the contribution occur?
• Should it go directly to the charity or through a DAF?
• Will the household itemize?
• How will the 0.5% floor and other deduction limits apply?
• Is this an unusually high-income year?
• Could the contribution help reduce a concentrated position?
• How quickly should the DAF make grants?
• Would recurring grants make the family’s giving easier to administer?

For households with appreciated investments and an established charitable intent, cash should not be the automatic choice.

A well-designed strategy can leave more money available for charity, reduce avoidable taxes, and consolidate years of charitable activity in one place. The paperwork will survive either way.

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This article is for informational purposes only and should not be considered financial, legal, or tax advice. The examples are hypothetical and omit factors that may be relevant to a particular taxpayer, including state taxes. Tax rules are complex and may change. Please consult your tax professional and other qualified advisors before implementing a charitable-giving strategy. Wolf Pine Capital does not guarantee the accuracy or completeness of the information provided. All investments involve risk, and past performance is no guarantee of future results.