The Year of Stock Gifting? Why Fundraisers (and Donors) are Rushing In

After two challenging years, nonprofits are embracing stock gifting to diversify and grow funding in 2024. Here is the context and charts to illustrate why 2024 may indeed be the year of stock gifting.

After charitable giving hit a record high of $516 billion in 2021, momentum stalled in 2022 as inflation, higher interest rates and economic uncertainty, combined with a shrinking pool of donors, resulted in the first contraction (-10% adjusted for inflation) in more than a decade. While the 2023 data is not yet available, it was another challenging year for most nonprofits.

The disruptions to cash giving is forcing fundraisers to seek new ways to diversify and grow revenue. At the top of the list is a renewed focus on non-cash giving, and within this asset class, stock represents the largest and lowest hanging fruit in the forest.

Why Stock?

Gallup recently reported that 61% of Americans now own stock, including 66% of those over 50 and 84% of households earning $100,000+. Combined, this group owns $40 trillion in stocks, ETFs and mutual funds. That’s a massive pool of potential funding.

Appreciated stock also represents one of the most tax-advantaged ways for donors to support nonprofits, as they can avoid capital gains tax and deduct the current value of stock held more than 12 months.

Pre-tax stock is also more impactful, as the recipients get to keep the proceeds that would have been paid in taxes had the donor sold the stock before donating the proceeds. Stock also represents much larger gifts, averaging more than $5,000 over the last few years.

The implications: most (if not all) mid-level and major donors own appreciated stock and are better off financially donating stock vs. cash. For these reasons, stock gifting is a must-have for organizations of all sizes.

Why Now?

As I write this, the stock market is at all-time high. In just the past 10 years, the S&P 500 has almost tripled while the NASDAQ 100 almost quadrupled, representing trillions in unrealized gains held by donors who have been trained by nonprofits to donate via check, ACH or credit card.

The need to diversify

With the market at all-time higher, many investors are seeking to harvest gains, mitigate risk and reduce concentration in stocks that have had outsized gains over the past 5-10 years – see the Best Stocks to Donate here. Investors generally have two options: sell the stocks and pay a tax on the gains, or share their gains tax-free with the causes they support.

Appreciated stock is the largest, most widely held and tax-advantaged source of non-cash funding. The top 10% investors represent $50-$75 billion in annual funding for nonprofits. For these reasons, there’s never been a bigger moment for fundraisers seeking to diversify and grow via non-cash giving. As noted below, nonprofits and higher ed institutions are starting to get the message.

Looking back at 2023

As the stock gifting platform for more than 2,000 nonprofits and higher ed foundations, DonateStock has been tracking stock gifting activity for the last 3 years. Here are some data points of interest from 2023:

In 2023 our nonprofit customers saw an average increase of 50.3% in proceeds from stock gifting on our platform. Even more interesting was the emergence of the recurring nature of stock gifting as 23% of donors made more than 1 gift, averaging 3.7 gifts worth $14,500 per donor.

Looking ahead at 2024

If the first three months of 2024 are an indication of things to come, it’s going to be a very big year for stock gifting. The rush to diversify funding and the continued strengthening of the stock market has led to a surge in new nonprofit registrations at donatestock.com. As illustrated in the chart below, nonprofit registrants to date grew 102% vs. the first three months of 2023.

We’ve also seen a substantial increase in stock donations and gift size during the first three months of 2024. Proceeds from stock gifting were up 363% in Q1’24, with an average gift size increasing 157% vs. 2023.

The implications are clear: donors are taking advantage of stock gifting to harvest gains in a tax-efficient way and nonprofits are leaning in to meet them.

A new way to donate stock

While stock gifting used to be a painstaking, manual process for donors and recipients, we’ve made it accessible and easy for everyone. DonateStock’s Easy Button for Stock Gifting™ enables donors to initiate online stock gifts in minutes, while our software provides automation and transparency that recipients need to remove the friction of handling and processing stock gifts. No brokerage, no problem! We can even process, reconcile and acknowledge the stock gift for you.