Donating RSUs and Stock Options to Charity: 2026 Tax Guide

Not tax or legal advice. Equity compensation charitable giving involves specific mechanics around vesting dates, holding periods, and AMT that vary by grant type and your individual tax situation. Work with a fee-only advisor to model your specific scenario before acting.

Why equity compensation is different from ordinary stock gifts

Donating long-held index fund shares is straightforward: hold more than one year, transfer to a DAF, deduct fair market value, avoid capital gains. But equity compensation — RSUs, ISOs, and NQSOs — has its own layer of mechanics. The vesting event, the holding-period clock that restarts on vest date, the ordinary-income recognition at exercise, and (for ISOs) the AMT preference all interact with charitable giving in ways that trip up even sophisticated donors.

For tech employees, executives, and founders with concentrated stock positions, the difference between an efficient and an inefficient equity donation can easily be $20,000–$100,000+ in taxes on a single transaction.

What you cannot donate

You cannot donate unvested RSUs or unexercised stock options to charity.¹ Until an RSU vests — or an option is exercised and shares are received in your brokerage account — you do not own the underlying shares. You have a contractual right to future shares, which is not a qualifying property gift. The IRS requires the donor to own the asset at the time of contribution.

Restricted Stock Units (RSUs)

What happens at vesting

When RSU shares vest, you recognize ordinary W-2 income equal to the fair market value of the shares on the vest date.² Your employer typically withholds shares to cover taxes ("sell to cover" or "net settlement"), or you may pay separately. The shares remaining after withholding have a cost basis equal to the vest-date FMV, and a new holding period that begins the day after vesting.

Example: 500 RSUs vest when your employer's stock is at $100/share. You recognize $50,000 of W-2 income. After withholding, you receive 375 shares. Each share has a basis of $100. Total basis in your resulting position: $37,500.

Two windows for donating RSU shares

Window 1: Donate immediately after vesting (within days)

If you transfer shares to a charity or DAF shortly after vesting, the stock typically has little or no appreciation relative to your basis — because basis = vest-date FMV. Your charitable deduction equals approximately the same FMV you recognized as ordinary income on the vest date. No additional capital gains are triggered.

• Deduction: FMV at donation ≈ vest-date FMV = your cost basis
• Capital gains avoided: None (no post-vest appreciation yet)
• AGI limit: Up to 60% of AGI (short-term property where deduction = basis)³
• Best for: Simplicity; when your employer's stock hasn't moved significantly since the vest date; when you want to give but can't wait a year

Window 2: Hold 1+ year post-vest, then donate

Once shares have been held more than one year from the vest date, they become long-term capital gain property. Donating now unlocks the full appreciated-stock benefit: deduction at the current (higher) FMV, plus avoidance of all long-term capital gains tax on post-vest appreciation.

• Deduction: Current FMV at donation date (higher than basis if stock rose)
• Capital gains avoided: (FMV − basis) × (20% LTCG + 3.8% NIIT + state) on all post-vest appreciation
• AGI limit: Up to 30% of AGI³
• Best for: Shares that have meaningfully appreciated since vesting (20%+ or more)

Example — Window 2 math: Those 375 shares vested at $100 (basis $37,500). Fourteen months later, the stock is at $140. You donate to a DAF:

• Deduction: 375 × $140 = $52,500 at FMV
• Post-vest gain: 375 × ($140 − $100) = $15,000 gain, which would have cost $3,570 in federal LTCG+NIIT (23.8%) if you had sold — completely avoided
• Federal income tax savings if you're in the 37% bracket (OBBBA 35% cap): $52,500 × 35% = $18,375
• Total federal tax benefit: $18,375 + $3,570 = $21,945 from 375 shares you would have written a $52,500 check for anyway

DAF transfer timing for RSU shares

The deduction is recognized in the year the DAF receives and acknowledges the shares — not when you initiate the transfer. Stock transfers from equity plan accounts to a DAF typically take 3–7 business days. Initiate by December 15 at the latest for a December 31 deduction. A transfer started December 28 will likely settle in January, costing you the deduction for an entire year.

Incentive Stock Options (ISOs)

ISO basics

ISOs allow employees to buy company stock at a fixed strike price. Unlike NQSOs, exercising an ISO does not trigger ordinary income — but the spread (FMV minus strike price) at exercise is an Alternative Minimum Tax (AMT) preference item.⁴

To achieve qualifying disposition treatment — where the entire gain is taxed as long-term capital gains rather than ordinary income — you must hold the resulting shares for:

• More than 2 years after the grant date, AND
• More than 1 year after the exercise date

If you sell or gift shares before meeting both tests, you have a disqualifying disposition, and the spread at exercise is recognized as ordinary income.

Donating ISO shares (qualifying disposition)

Once ISO shares have cleared both holding periods, donating them to charity or a DAF works just like any other long-term appreciated stock gift:¹

• Deduction: FMV at donation date
• Capital gains avoided: Full gain above exercise price (strike price), taxed at 20% LTCG + 3.8% NIIT if you had sold
• AGI limit: 30% of AGI

Donating ISO shares (pre-qualifying)

If you donate ISO shares before meeting the two-year/one-year holding tests, the donation constitutes a disqualifying disposition. The spread at exercise is recognized as ordinary income, and your charitable deduction is limited to your cost basis (the strike price you paid), not FMV. The economics are generally poor relative to waiting — do not donate ISO shares before meeting the qualifying holding periods.

Non-Qualified Stock Options (NQSOs)

NQSO basics

When you exercise NQSOs, you recognize ordinary W-2 income equal to FMV minus the strike price.² Your cost basis in the resulting shares equals the FMV at exercise. From that point, the shares are treated like any stock purchase — long-term gains if held more than one year, short-term if less.

Donating NQSO-derived shares

You cannot donate an unexercised NQSO. After exercise, the shares follow the same donation rules as RSU shares or any brokerage position:

• Held ≤ 1 year post-exercise: Deduction = cost basis (FMV at exercise); 60% AGI limit. Avoids no capital gains, since no long-term gain has accrued.
• Held > 1 year post-exercise: Deduction = current FMV; avoid LTCG on appreciation above exercise price; 30% AGI limit. This is the efficient strategy if the stock has risen since exercise.

Equity type comparison

OBBBA impact on high-equity-income years

Tech and executive compensation frequently places individuals in the 37% federal income tax bracket — especially in heavy RSU vesting years or large NQSO exercise years. Two 2026 OBBBA changes create specific headwinds for equity-compensated donors:

• 0.5% AGI floor: Only charitable contributions exceeding 0.5% of your AGI are deductible as itemized deductions.⁵ In a year when you vest $600,000 in RSUs and your total AGI is $800,000, the first $4,000 of your charitable giving is non-deductible. For donors giving $50,000–$500,000 per year, this is a modest but real drag on deduction value.
• 35% benefit cap: If you're in the 37% bracket, each dollar of charitable deduction saves only 35 cents in federal income tax — not 37 cents.⁵ On a $200,000 contribution, this costs you $4,000 relative to the full 37% rate. Factor this into your net-benefit calculation, though the capital gains avoidance is unaffected by the cap.

Despite these headwinds, funding a DAF with appreciated RSU shares in a high-compensation year remains highly efficient. You eliminate 23.8% federal LTCG+NIIT on post-vest appreciation, deduct at FMV (at the 35% effective cap rather than 37%), offset RSU ordinary income, and the DAF assets compound tax-free until distributed to charities on your timeline.

Choosing the right vehicle

Donor-Advised Fund

The default choice for most equity-compensated donors. The DAF accepts publicly traded shares directly via DTC transfer, sells tax-free, and reinvests the proceeds. You receive the deduction in the year of contribution; grants to your charities happen whenever you choose. Minimum contribution at major sponsors (Fidelity Charitable, Schwab Charitable, NPT) is typically $5,000–$25,000.⁶ The DAF also simplifies record-keeping: one transfer, one acknowledgment letter, one Form 8283.

Direct to charity

Appropriate for a targeted large gift to a single institution — a university, hospital, or named fund — where your charitable intent won't change. Large institutions have stock transfer desks and can accept in-kind shares. You lose the flexibility to redirect the gift once made, and some smaller nonprofits can't accept in-kind shares at all (they'll ask you to sell and send cash, triggering capital gains).

Charitable Remainder Trust

For very large concentrated equity positions — typically $500,000 or more — where you want ongoing income alongside a charitable deduction: a CRT accepts shares, sells tax-free inside the trust, and distributes an annual income stream to you for life or a set term. The charitable deduction equals only the actuarial "remainder" going to charity, so the immediate deduction is smaller than a straight donation. Setup and administration costs ($3,000–$7,000+ annually) must be justified by the size and duration of the position.

Step-by-step: donating RSU shares to a DAF

1. Identify your eligible shares. Log into your equity platform (Fidelity, Schwab, E*TRADE, Carta, etc.) and identify vested shares held more than one year, or recently vested shares where the stock price is near the vest date price.
2. Open a DAF account at your preferred sponsor. Setup typically takes 1–3 business days online.
3. Initiate an in-kind DTC transfer. Provide your equity platform with the DAF's DTC participant number and account number. Stock transfers typically settle in 3–7 business days. Start by December 15 for a year-end deduction.
4. Retain documentation. Keep the transfer confirmation, a brokerage statement showing the FMV on the date of transfer, and the DAF's written acknowledgment of the contribution. You'll need the acknowledgment for your tax return.
5. File Form 8283. If your total noncash charitable contributions exceed $500 in the tax year, attach Part I of Form 8283 to your return. For publicly traded shares donated to a DAF, no independent appraisal is required.

Common mistakes

• Selling shares and donating cash. This forfeits the capital gains avoidance. Transfer shares in-kind — never sell first if the position has significant appreciation.
• Donating RSU shares within 12 months of vesting when the stock has risen. The deduction is limited to basis (vest-day price), not FMV. Hold the shares through the one-year anniversary of the vest date before donating to capture the full FMV deduction on appreciation.
• Donating ISO shares before meeting qualifying disposition periods. This triggers a disqualifying disposition, recognizing ordinary income and typically producing a worse tax outcome than waiting or selling and donating cash. Do not donate ISO shares until you've met the 2-year-from-grant and 1-year-from-exercise requirements.
• Missing year-end DAF transfer deadlines. A transfer initiated December 28 will likely settle in January — the deduction is lost for the current tax year. Start transfers by December 15 to allow for settlement.
• Donating ISO shares and assuming AMT credit is preserved. If you paid AMT in the ISO exercise year, that AMT credit is normally recovered by selling the shares in a regular-tax year. Donating instead of selling may delay or eliminate that credit recovery. Model this with your advisor.
• Assuming your equity platform automatically supports in-kind DAF transfers. Most major platforms do, but older municipal equity platforms or pre-IPO cap table systems may not. Verify with your plan administrator that DTC in-kind transfers are available before year-end.

What a specialist models that you can't easily do yourself

Equity compensation charitable planning requires coordinating ordinary income, capital gains, AMT, NIIT, the OBBBA 0.5% floor and 35% cap, AGI carryforward limits, and the timing of multiple vest and exercise dates across years. A charitable planning specialist will typically model:

• Your RSU vest schedule over the next 3–5 years, identifying which cohorts have the highest embedded gain relative to current price
• Whether to donate at vest or wait for the 1-year holding period, given your view of the stock
• ISO exercise timing, AMT exposure, and AMT credit recovery — coordinated with planned charitable gifts
• Whether a CRT makes sense for a very large, concentrated equity position
• DAF funding to offset peak-income RSU vest years, reducing the effective marginal rate on compensation income
• Interaction with Roth conversion plans, RMD schedules, and estate planning

For employees with multi-year RSU grants and significant appreciation, this modeling frequently identifies $30,000–$150,000 of incremental tax savings relative to an uncoordinated approach.