A donor-advised fund lets you donate stock you’ve held more than a year, skip the capital gains tax on its rise, and, if you itemize, deduct its full market value now. The money stays invested while you pick charities over time. If you give every year and own winners like that, open one before your next donation.
Writing a check wastes a tax break if you also own investments that have grown. The fix takes one account and one transfer.
Say you itemize, pay a 15% rate on long-term gains, and own shares bought more than a year ago for $5,000 that are now worth $15,000. Sell them to fund your giving, and you owe about $1,500 in tax on the $10,000 gain. Move the shares into a donor-advised fund instead, and that tax never comes due, while the full $15,000 market value counts toward your deduction in the year you contribute. Deductions for donated stock are capped at 30% of adjusted gross income a year, and 60% for cash. The fund invests the money for tax-free growth, and you recommend grants to charities now or over time.
The other payoff is timing. Only 9.5% of 2022 tax returns itemized deductions, according to IRS data. Starting in 2026, itemizers can also deduct charitable gifts only above 0.5% of their adjusted gross income. Bunching, moving several years of planned giving into the fund in one high-income year, means the floor cuts your deduction once, not every year, and can push your itemized total past the standard deduction.
Pick a sponsor and open an account online. Fidelity Charitable and Schwab’s DAFgiving360 have no minimum to open, and Vanguard Charitable requires $25,000. Expect an administrative fee of about 0.6% of assets a year, with a $100 minimum at Fidelity. Then transfer shares you’ve held more than a year straight from your brokerage account instead of selling them first.
Two cases call for cash. Sell shares that have lost value, claim the loss, and give the proceeds. And if you won’t itemize even after bunching, send cash gifts straight to charities. The new 2026 deduction for non-itemizers, worth up to $1,000 on a single return and $2,000 on a joint one, excludes donor-advised funds, though stock you donate skips the gains tax whether you itemize or not.
Start with your biggest winners. Every dollar of gain you give away is a dollar of gain you never pay tax on.
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