United States
Hong KongCharitable giving: appreciated property, bunching and the AGI limits
Donating long-term appreciated property gives a deduction for fair market value and avoids the capital gain entirely. Cash gifts to public charities are deductible up to 60 per cent of AGI; appreciated property up to 30 per cent.
One technique dominates this topic and it is worth stating first: give the appreciated holding, not the cash.
Why appreciated property wins
Donate a security held more than a year and you deduct its fair market value and never realize the gain. The charity, being tax exempt, sells without tax.
Sell it yourself and donate the proceeds, and you pay tax on the gain first, leaving less to give and a smaller deduction.
Same intention, materially different outcome. That comparison is the standard exam question.
The AGI limits
| Gift | To a public charity | To a private foundation |
|---|---|---|
| Cash | 60 per cent of AGI | 30 per cent |
| Long-term appreciated property | 30 per cent of AGI | 20 per cent |
| Short-term property or ordinary income property | Basis, up to 50 per cent | Basis, up to 30 per cent |
Excess carries forward for five years. The third row matters: property held a year or less is deductible only at basis, which removes the entire advantage.
Donating a security held eleven months gives a deduction limited to basis. Waiting a month converts it to a fair market value deduction and eliminates the gain. It is one of the cleanest planning points in the domain.
Bunching and donor-advised funds
The large standard deduction means many taxpayers get no benefit from charitable giving in a normal year.
Bunching concentrates several years of giving into one, exceeding the standard deduction that year and taking it in the others. A donor-advised fund makes that practical: contribute and deduct now, grant to charities over subsequent years.
The fund also accepts appreciated securities, which combines the two techniques.
The qualified charitable distribution
From age 70½, an IRA owner may direct a distribution to charity, up to an annual limit. It is excluded from income rather than deducted.
That distinction is the point. Exclusion reduces AGI, which helps with Medicare surcharges, the taxation of Social Security, and any AGI-driven phase-out - and it works whether or not the taxpayer itemizes. It also counts toward the required minimum distribution.
The split-interest trusts
A charitable remainder trust pays income to the donor or another beneficiary and leaves the remainder to charity. A charitable lead trust does the reverse.
Both are examined more fully in the estate domain, and the connection worth holding here is that a remainder trust funded with appreciated property can diversify a concentrated position without an immediate capital gain.
Dollar limits and rate thresholds here are indexed annually and several were changed by the 2025 reconciliation act. Confirm the current figure against the IRS before relying on it.
Common questions
Why donate appreciated stock rather than cash?
You deduct fair market value and never realize the gain, and the charity sells tax free. Selling first and donating the proceeds means paying tax on the gain, leaving less to give.
What are the charitable AGI limits?
Cash to a public charity is deductible up to 60 per cent of AGI, long-term appreciated property up to 30 per cent, with lower limits for private foundations. Excess carries forward five years.
What if the property was held less than a year?
The deduction is limited to basis rather than fair market value, which removes the advantage entirely. Waiting past the one-year mark is a clean planning point.
What is a qualified charitable distribution?
A direct transfer from an IRA to charity from age 70½, excluded from income rather than deducted. It reduces AGI, works without itemizing, and counts toward the required minimum distribution.
What is bunching?
Concentrating several years of charitable giving into one year to exceed the standard deduction, taking the standard deduction in the others. A donor-advised fund makes the timing practical.