Writing a Check Is the Worst Way to Give

A smarter way to be a greater giver

When it comes to charitable giving, few people realize that writing a check is often the least efficient way to support your favorite cause. While the intention is noble—and the method simple—this approach may be costing both you and the charity more than necessary.

Why Writing a Check Costs More
When you donate by check or credit card, you’re giving after-tax dollars. That means you’ve already paid federal and state income taxes—or capital gains taxes—on that money. If you’re in a top income bracket, it could take more than $1.50 of earned income to give $1.00 to charity. The charity may receive your full gift, but the IRS took a big bite along the way.

A Better Way: Donate Appreciated Assets
There’s a much more tax-efficient strategy: donate appreciated investments, such as publicly traded stocks, ETFs, or mutual funds. If you’ve held the investment for more than a year, you avoid paying capital gains tax on the appreciation—and you receive a charitable deduction for the full fair market value. The charity, being tax-exempt, can sell the investment tax-free and put 100% of your gift to work.

Example: Donating Stock vs. Selling It
Let’s say you bought a stock for $2,000 that’s now worth $10,000.
– Sell it first? You’ll owe up to $1,900 in capital gains taxes (at 23.8%)—leaving just over $8,000 for charity.
– Donate it directly? You avoid taxes, get a full $10,000 deduction, and the charity receives the full amount.
You’ve just redirected $1,900 from the IRS to the charity.
Bonus benefit: This is also a smart way to reduce concentrated stock positions in your portfolio.

The chart below compares the financial impact of different charitable giving strategies:

Source: ACM Wealth Based on a hypothetical taxpayer in the following tax situation:1. Ordinary income tax bracket: 37% federal. 2. State income tax rate: 5%. 3. Combined effective income tax rate: 42%. 4. Long-term capital gains tax rate: 20%. 5. Net Investment Income Tax (NIIT): 3.8% and Total capital gains tax rate: 23.8%.  additional assumptions: 1. The donor itemizes deductions.  2. The appreciated stock has a $4,000 cost basis and a $10,000 market value.  3. Selling the asset results in a $6,000 capital gain, which triggers $1,428 in capital gains tax.  When donating appreciated stock directly, no capital gains tax is paid, and the donor receives a charitable deduction for the full fair market value.  For illustrative purposes only and does not constitute tax or legal advice. Individual tax situations vary, and you should consult your tax advisor for personalized guidance.

Consider Using a Donor-Advised Fund (DAF)
Donor-advised funds are one of the most powerful, flexible tools for charitable giving. With a DAF, you can contribute appreciated assets, receive the deduction in the current year, and then recommend grants to your favorite causes over time.
Think of it as your own personal charitable foundation—without the cost, complexity, or paperwork. Fidelity Charitable and Schwab Charitable are among the largest DAF sponsors, and ACM Wealth can help you open and fund your own DAF with appreciated assets.

You Can Give More Than Just Stock
You can also donate non-traditional appreciated assets—such as real estate, private business interests, or even cryptocurrency. These gifts may require planning and a DAF sponsor with the right infrastructure, but the tax savings can be substantial.

Will My Charity Qualify to Receive a DAF Gift?
In most cases, yes. But to receive grants from a DAF, a charity must:
– Be a qualified 501(c)(3) public charity (not a private foundation)
– Be in good standing with the IRS (check the IRS TEOS database)
– Not provide personal benefits to the donor (no gala tickets, tuition, or pledge payments)
– Be approved by the DAF sponsor, such as Fidelity, Schwab or community foundation
Most DAFs maintain a database of pre-approved charities and will handle all compliance behind the scenes.

Summary: Don’t Just Give—Give Smarter
Before your next charitable gift, pause before you reach for the checkbook. A thoughtful strategy using appreciated investments—or a donor-advised fund—can allow you to give more to charity without it costing you more. Your ACM wealth advisor can help to be a greater giver.

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