Well, that depends upon how you define “smart.” Actually, if you have held stock for more than a year, donating it directly to charity is one of the most tax-smart ways to give. Why? Because when you donate stock (or mutual fund shares) directly to charity, you avoid paying capital gains taxes. In effect, you are giving up to 20 percent more than if you sold the stock first and then made a cash donation.
In addition to the tax advantage of giving stock to charity, today’s tax environment makes contributing to a donor advised fund (DAF) extremely attractive. With a higher standard deduction, fewer people are itemizing. By funding a DAF, you can bundle multiple years of charitable giving in one year and direct those gifts over time. If you use an appreciated asset, you benefit from both avoiding capital gains and the ability to take the charitable deduction.
Everyone’s situation is unique, and I am happy to answer questions and provide options on how to maximize your charitable giving, but since I am neither an accountant nor attorney, you should always contact your professional advisor for advice specific to your situation.