Charitable Giving with Appreciated Equity: DAFs and CRTs

Donating appreciated stock directly to charity under IRC §170 produces two tax benefits: an income tax deduction at fair market value (not cost basis) and elimination of capital gains tax that would otherwise be owed on sale. For a tech employee with $100,000 of employer stock and $10,000 of basis, the tax savings from donating in-kind versus selling-then-donating is roughly $18,000 (the capital gains tax avoided at 23.8% federal on the $90k gain, plus state).

This creates a powerful opportunity for anyone with concentrated appreciated positions who plans to give to charity anyway. The mechanics matter. Gifting publicly traded stock is straightforward. Gifting private company stock is complicated, requires a qualified appraisal, and has a 30% AGI deduction limit versus 50% for cash. Both donor-advised funds and charitable remainder trusts are commonly used vehicles, each suited to different situations.

This guide covers the core mechanics of appreciated-stock giving, the DAF versus CRT tradeoff, the AGI deduction limits, the valuation rules for private stock, and the year-end timing considerations that affect deduction size.

The two tax benefits stacked

When you sell $100k of stock with $10k basis and donate the $100k of proceeds, you first owe capital gains tax on $90k ($21,420 at 23.8% federal). You donate the remaining $78,580 and get a deduction at that amount. Net of the deduction at a 37% marginal rate, your after-tax cost of the donation is $78,580 × (1 - 0.37) = $49,505.

When you donate the stock directly, no capital gains tax is triggered. You deduct the full $100k FMV. Net of the deduction at a 37% rate, your after-tax cost of the donation is $100,000 × (1 - 0.37) = $63,000.

Wait: the direct-donation case looks more expensive. The math above compares the cost of making the donation, not the total benefit. To equalize the gift size, let’s look at what you have to give up to put $100,000 into charity’s hands:

Method	Stock sold	Tax on sale	Donated	AGI deduction	Net cost to donor
Sell then donate	$127k (to net $100k after 21.4% tax)	$27k	$100k	$100k × 37% = $37k	$127k - $37k = $90k
Donate in-kind	$100k	$0	$100k	$100k × 37% = $37k	$100k - $37k = $63k

Net savings from donating in-kind: $27k. This is the capital gains tax avoided. For holders with large embedded gains, the savings scale proportionally.

AGI deduction limits

Charitable deductions are limited by AGI, with different limits for different types of property:

Property type	Limit	Carryforward
Cash to public charity (inc. DAFs)	60% of AGI	5 years
Appreciated LTCG property to public charity	30% of AGI	5 years
Cash to private foundation	30% of AGI	5 years
Appreciated LTCG property to private foundation	20% of AGI	5 years

For a donor with $500k of AGI, the maximum appreciated-stock deduction to a public charity or DAF in one year is $150k. Excess can be carried forward for up to five years at the same 30% AGI limit each year.

For very large one-time gifts (a concentrated-stock holder donating $1M in a single year on $500k AGI), the donor will use only $150k in the current year and carry forward $850k. If future AGI is lower, the carryforward may not fully absorb before year 5 expiration.

Planning moves: donate in years of high AGI (large equity vesting, QSBS sale, acquisition close). Stagger large donations across multiple years if AGI is steady. Consider accelerating income (Roth conversion, exercising ISOs as disqualifying dispositions) into years with large donations to create deduction headroom.

Donor-advised funds

A DAF is an investment account held at a sponsoring public charity (Fidelity Charitable, Schwab Charitable, Vanguard Charitable, National Philanthropic Trust, and community foundations). The donor contributes assets to the DAF, claims the deduction immediately, and then recommends grants to charities over time.

Advantages:

Immediate full deduction at contribution.
Assets grow tax-free inside the DAF.
Grants to any 501(c)(3) public charity, at any time, no minimum.
No tax reporting burden on the donor for grants; the DAF handles compliance.
Accepts appreciated stock, including private stock with accepting sponsor.
Low fees (0.6-1.0% of AUM at most major sponsors).

Disadvantages:

Donor loses legal control. Technically the sponsor “grants at the donor’s recommendation” and can decline, though declines are extremely rare.
No private foundation-style benefits (paid staff, family involvement in grant-making at scale).
Inherited DAFs have limited multi-generational continuity.

DAFs are the dominant vehicle for appreciated-stock giving at the $25k-$5M contribution level. They handle the paperwork, accept unusual assets, and give the donor time to decide on ultimate recipients.

Bunching strategy. Donors who otherwise would itemize just barely over the standard deduction can bunch two or three years of intended giving into a single DAF contribution, itemize large in that year, and take the standard deduction in the off years. Over a multi-year period, this generates more total deduction than steady-state annual giving.

Charitable remainder trusts

A CRT is an irrevocable trust that pays an annuity or unitrust amount to the donor (or named beneficiary) for a term of years or for life, with the remainder passing to charity at the end of the term.

Mechanics. Donor contributes $2M of appreciated stock to a CRT. The trust sells the stock (no capital gains tax inside the trust). The trust pays the donor 5% annually (CRAT) or 5% of the trust’s current value annually (CRUT) for 20 years or life. At the end of the term, the remaining corpus passes to one or more designated charities.

Tax treatment:

Donor receives immediate charitable deduction equal to the present value of the charitable remainder (calculated under §664 using the §7520 rate). Typical CRAT deduction: 10-30% of the contribution.
Donor’s income from the CRT is taxed under the four-tier system: ordinary income first, then capital gain, then tax-exempt, then return of basis. The net effect is that gain recognition is spread out.
Trust’s internal sale of appreciated stock is not currently taxable.

Best for: donors with very large appreciated positions who want income, have charitable intent for at least 10% of the contribution, and want to spread gain recognition over many years.

Worse for: donors who want flexible control (CRTs are irrevocable and distribution rates are fixed at creation), donors with modest charitable intent (CRT is not a pure tax-deferral tool), or donors who need liquidity in a single year (CRT spreads income over the term).

The §7520 rate matters. Higher rates make CRUTs more generous on the deduction calculation. Lower rates make CRATs more generous. Current rates are around 5%, making CRUT deductions relatively attractive.

Private company stock donations

Donating pre-IPO or private stock to charity is possible but more complicated than public stock. Requirements:

Qualified appraisal by a qualified appraiser (IRC §170(f)(11)), required for any non-cash gift above $5,000 of closely held stock. The appraisal must be prepared no earlier than 60 days before the gift.
Form 8283 Section B filed with the tax return for non-cash gifts above $5,000.
The charity (DAF sponsor or direct 501(c)(3)) must be willing to accept private stock. Many sponsoring charities do; some do not.
The private stock must be legally transferable, which requires satisfying any company ROFR or transfer restrictions.

For pre-IPO employees sitting on $500k-$5M of private stock with very low basis, donating some of it to a DAF before an IPO can lock in a large FMV deduction while sidestepping the capital gains tax that would otherwise be owed on later sale. The DAF can then hold the stock and sell into the IPO or tender, funding future grants.

Timing is sensitive. The appraisal must reflect FMV at the gift date. Gifts made too close to a known liquidity event may be challenged by the IRS as pre-arranged sales, with the donor’s deduction revalued downward.

Year-end timing

For public stock donations, the transfer is complete when the stock is delivered to the charity’s brokerage account. Many charities report 3-7 business days for processing. For a December 31 deduction year, start the process by December 15 at the latest. Mid-December is safer.

For private stock donations, the process can take weeks. Company approval of the transfer, qualified appraisal preparation, and DAF sponsor intake can each add days. For year-end completion, start in October.

Pro tip: most major DAF sponsors accept in-kind stock contributions into an existing account within 48 hours of initiation if the stock is at the same brokerage. For a Fidelity brokerage account to Fidelity Charitable DAF transfer, same-day is feasible.

Frequently asked

Can I donate RSU shares before I sell them? Yes, vested RSU shares are regular stock once vested. You can donate them directly to a DAF or charity. Unvested RSUs cannot be donated because you do not own them yet.

What if I want to donate but keep the voting control? Voting rights pass with the donation. You lose the votes on the donated shares. For founders who want to retain voting control, gift-to-trust structures with non-voting share classes can sometimes preserve voting without retaining economic exposure.

Is a DAF or CRT better for me? DAF for most people. CRT for donors with very large positions (typically $1M+), clear life-term charitable intent, and a desire for income. DAFs are simpler, cheaper, and more flexible.

Can I contribute to multiple DAFs? Yes. Some donors maintain DAFs at multiple sponsors for different purposes (Fidelity for convenience, community foundation for local grants). Deductions combine across all DAFs under the single AGI limit.

What about private foundations? Private foundations offer more control but more overhead: annual tax return (Form 990-PF), required 5% annual distribution, excise tax on investment income, and self-dealing restrictions. For assets under $5M, DAFs are usually better. Above that, private foundations start to make sense for donors who want a family-run grant-making operation.

Next step

Before any large charitable gift, confirm the asset type, the recipient’s acceptance policies, and the AGI deduction limit. The charitable giving calculator estimates the deduction, tax savings, and net cost of alternative giving methods. For gifts above $250k or involving private stock, engage a CPA or tax attorney before the calendar year closes; timing and documentation errors at this scale cost real money.