Gifting Appreciated RSUs vs Cash: The 30% vs 60% AGI Limits

When you donate to a public charity, IRC §170 sets AGI-based limits on how much you can deduct. Cash donations can be deducted up to 60% of AGI under §170(b)(1)(G). Appreciated stock donations are capped at 30% of AGI under §170(b)(1)(C)(ii). Excess contributions carry forward for 5 years.

For equity-heavy earners in a high-income year, IPO, secondary sale, large vest, the choice between donating cash versus appreciated stock involves both the tax rate on the deduction and the capital gains avoided on the donated shares.

The standard answer: donate appreciated stock up to the 30% limit, then cash up to the remaining headroom within the 60% limit. But the math shifts depending on the specific gain ratio and tax situation.

The two AGI limits

For a taxpayer with $5M AGI:

Cash donations to public charity: up to $3M (60% AGI)
Appreciated stock to public charity: up to $1.5M (30% AGI)
Combined: up to $3M total (the 60% cap is the overall ceiling)

If the taxpayer donates $1.5M of appreciated stock and $1.5M of cash, both limits are satisfied and both are fully deductible. If they donate $2M of stock and $1M of cash, the stock donation exceeds 30%: $500K excess carries forward.

For donations to private foundations (§170(b)(1)(B)), the limits are tighter: 30% of AGI for cash, 20% for appreciated stock.

The capital gains avoidance

Donating appreciated stock to a public charity transfers the stock without recognizing capital gain. The donor deducts fair market value; no gain is reported.

Example: 1,000 shares, $50 basis, $250 FMV.

Sell and donate $250K cash: $200K capital gain, $47K tax (23.8%), net out-of-pocket for $250K gift = $47K tax + $0 stock = $47K net cost after the deduction
Donate stock directly: $0 capital gain, deduction $250K, net cost after deduction = ~$125K (roughly half via deduction value)

The direct-donation path saves the capital gains tax entirely. For high-basis stock, the savings are small. For low-basis stock (recently vested RSUs with 2-3x appreciation), the savings are substantial.

Deduction value by tax bracket

Deduction value depends on marginal tax rate:

37% federal + 13.3% CA = 50.3% combined
37% federal + 0% TX = 37%
32% federal + 5% MA = 37%

For a $500K appreciated stock donation:

California top-bracket: $251,500 tax savings
Texas top-bracket: $185,000 tax savings

Plus the capital gains avoidance:

CA top-bracket: $200K gain × (20% + 3.8% NIIT + 13.3% CA) = $74,200
TX top-bracket: $200K gain × (20% + 3.8%) = $47,600

Total tax benefit on $500K appreciated stock donation (CA top bracket): $325,700. Effective out-of-pocket cost: $174,300 for $500K of giving.

When cash is better than stock

Cash donations are preferable when:

Stock has high basis. If basis is near FMV, there’s little capital gain to avoid. Cash is simpler.
AGI allows both. If AGI headroom supports both stock and cash donations, use stock first (30% limit) then cash (60% limit).
Donor wants larger deduction in one year. The 60% cap on cash is higher than 30% on stock.
Timing considerations. Stock donation requires transfer paperwork and holding-period verification. Cash is faster.

For most appreciated-stock holders, the optimal mix is 30% appreciated stock + 30% cash = 60% total in a given year.

The short-term vs long-term rule

For appreciated stock, the fair-market-value deduction applies only to long-term holdings (>1 year). Short-term appreciated stock is deductible only at basis.

For recently-vested RSUs, basis is the FMV at vest. If stock has appreciated minimally since vest, basis is near FMV and the difference doesn’t matter. If stock has dropped since vest, donating is still deductible at lower of basis or FMV.

Sequence for RSU donors:

Track each vest tranche separately
Donate tranches that vested >1 year ago
Hold recent vests until they cross the 1-year mark before donating

Example: IPO-year donor

Senior IC with $5M AGI in IPO year, holding $2M of pre-IPO stock at basis $200K (vested 3 years ago, now LTCG).

Strategy A (all stock):

Donate $1.5M appreciated stock (30% AGI limit): deduction $1.5M
Cannot donate more stock this year
Excess stock contributions carry forward 5 years

Strategy B (stock + cash):

Donate $1.5M appreciated stock (30% AGI)
Donate $1.5M cash (remaining 30% AGI within 60% cap)
Total deduction: $3M
Capital gains avoided on $1.5M of stock

Strategy B produces $3M deduction in year 1 vs Strategy A’s $1.5M. Strategy B requires having $1.5M of cash available for donation.

For a donor without excess cash, Strategy A with carryforward is the path. Excess $500K appreciated stock contributions carry to year 2 (if AGI remains high) and fill more headroom.

DAF as the vehicle

Most large appreciated-stock donations go through a DAF rather than directly to operating charities:

Charity may not accept pre-IPO private stock
DAF handles liquidation; operating charity may not want stock sale logistics
Donor retains grant-recommendation control

For cash donations, direct-to-operating-charity is often fine.

Interaction with the SALT cap and standard deduction

Post-TCJA, many taxpayers take the standard deduction because SALT + mortgage + charitable doesn’t exceed $27,700 (2023 married filing jointly). High-equity earners with large AGI often itemize anyway due to the charitable and state-tax impact.

Bunching donations into one year (alternating high-donation years with standard-deduction years) is a strategy for taxpayers on the margin. For consistent high-income tech earners, itemizing is usually the default.

Frequently asked

Can I donate appreciated stock to my private foundation at 60% AGI? No. Private foundations have lower limits: 30% AGI for cash, 20% AGI for appreciated stock. Use a DAF or direct-to-public-charity for higher limits.

What’s the deduction for mutual fund shares? Same rules as stock. Appreciated mutual fund shares held >1 year deduct at FMV up to 30% AGI limit.

Does §6501 statute apply to carryforwards? Yes. Keep contribution records permanently for carryforward tracking. The IRS can audit the original contribution year (within §6501 statute) and disallow later-year deductions.

What if my AGI is very low? Same 30%/60% limits apply to the lower AGI. Excess contributions carry forward 5 years. A low-AGI year followed by high-AGI years can lose the carryforward if not used within 5 years.

How does this interact with trailing nexus? Not directly. Charitable deduction is federal and applied to state taxable income via state conformity. For California residents, the federal deduction flows through to California state tax reduction.