Donating Cash vs Non-Cash Assets

In honor of National Philanthropy Day, below is a brief primer on the tax benefits of charitable contributions/donations.

Fortunately for US taxpayers, the IRS provides income tax benefits for charitable donations and capital gains tax benefits if those donations are made with appreciated assets. See below:

Income Tax Deduction
Capital Gains
Tax Avoided
Short-Term Appreciated Assets
(Held <1 year)
Cost Basis
Long-Term Appreciated Assets
(Held >1 year)
Market Value
Depreciated Assets
(don’t donate these 😉 )
Market Value

Obviously, the dual impacts of receiving an income tax deduction and avoiding capital gains tax are beneficial. Consequently, the above methods can be used to dispose of assets or reallocate/rebalance portfolios in a tax-efficient way. I should note that the above is a high-level overview and there are additional tax issues to consider, so donors should consult with their tax adviser before making any donations.

What assets can be donated?

  • Liquid securities suchs as stocks, bonds, mutual funds, ETFs, derivatives, and so on.
  • Illiquid assets such as insurance contracts, restricted stock, employer stock options, business interests
  • Real assets, such as real estate or commodities
  • Other complex and esoteric assets

Many organizations are setup to accept liquid securities, but most do not have the resources to accept illiquid and/or complex assets. Typically, these can only be donated to (larger) well-resourced organizations or contributed to a foundation or donor-advised fund before being granted out to the end charity. Future posts will cover various charitable vehicles and strategies.