Stock donations are one of the most tax-efficient ways a donor can give to a church -- and one of the most underutilized. A donor who gives appreciated stock instead of cash can avoid capital gains tax on the appreciation entirely, while still deducting the full fair market value of the shares. For a major donor sitting on a significant gain, the difference in tax savings can be substantial.

But accepting stock requires a bit of infrastructure the church may not have in place. Here is everything you need to know to accept stock donations and process them correctly.

The Tax Advantage for Donors

The benefit of giving stock instead of cash is best understood with a simple example. Suppose a donor purchased 100 shares of stock for $10,000 ten years ago. Those shares are now worth $40,000. If the donor sells the shares and donates the cash, she pays capital gains tax on the $30,000 gain -- at 15% to 20% for long-term gains, that is $4,500 to $6,000 in taxes. She then donates whatever is left after taxes.

If she instead donates the shares directly to the church, she pays no capital gains tax at all and deducts the full $40,000 fair market value as a charitable contribution. The church sells the shares tax-free (as a 501(c)(3) organization) and receives the full $40,000.

Both the donor and the church come out ahead compared to the cash route. This is why stock giving tends to accelerate during market run-ups and is disproportionately common among major donors.

Key Takeaway

To get the capital gains tax benefit, the donor must transfer the shares directly to the church. If the donor sells first and then donates cash, the capital gains tax applies. The transfer of actual shares, not the proceeds, is what triggers the favorable treatment.

Setting Up a Brokerage Account

To accept stock donations, your church needs a brokerage account in the church's name. Most major brokerages -- Fidelity, Schwab, Vanguard -- offer accounts for nonprofit organizations with no minimum balance and no annual fee. The application requires the church's EIN and documentation of its tax-exempt status.

Once the account is open, you will have a DTC (Depository Trust Company) account number and a brokerage account number. Donors need both to initiate a transfer. Create a one-page "how to give stock" instruction sheet with those numbers and the church's legal name exactly as it appears at the brokerage. Keep it current and make it easy to find on your website or giving page.

Processing the Gift

When shares arrive in the church's brokerage account, take these steps:

  1. Identify the donor. Stock transfers do not always include the donor's name. Contact your brokerage to identify incoming transfers, or ask donors to notify you when they initiate a transfer so you can match them up.
  2. Record the date of receipt. The date the shares arrive in the church's account is the date of the gift -- not the date the donor initiated the transfer or the date the church sells the shares.
  3. Record the fair market value on the date of receipt. The donor's deduction is based on the mean of the high and low trading prices on the date of the gift. Pull that data and record it before selling.
  4. Sell promptly. Most churches should sell donated shares as soon as administratively possible. The church has no obligation to hold the shares, and holding them introduces investment risk to what should be a straightforward transaction.
  5. Issue an acknowledgment. The giving statement should describe the shares donated (number and name of the security) and the date received, but should not include a dollar value. The donor determines value.

What Not to Do

  • Do not tell the donor what their shares are worth. Valuation is the donor's responsibility. If they donate shares worth more than $5,000, they need to complete IRS Form 8283 and in some cases obtain a qualified appraisal. That is their obligation, not the church's.
  • Do not accept stock in a private company without advice. Publicly traded stock is straightforward. Stock in a private company, restricted shares, or stock options are much more complex and may not be appropriate to accept without legal and accounting guidance.
  • Do not let the donor sell and give you the proceeds. If the donor controls the sale and gives cash, the capital gains apply to them. The shares must transfer to the church first.
Watch Out

Make sure your acknowledgment letter describes the shares given but assigns no dollar value. A church that states "we received a gift of 100 shares of Apple valued at $40,000" has taken on a valuation responsibility it should not have. Describe what was received; let the donor determine value.

How Dime Handles This

We help churches set up brokerage accounts, create donor-facing stock giving instructions, and process stock gifts correctly in the accounting system. We also review acknowledgment letters to make sure they describe -- but do not value -- the donated shares.

If your church has not set up a brokerage account yet, or if you have received stock donations in the past that you are not sure were handled correctly, reach out to our team. Getting the infrastructure in place takes a few hours and pays dividends every time a major donor is ready to give.