Can you ELI5. How does donating your stocks help? Don't you lose everything then?
What cash is there in this situation?
Say you bought 100 shares of XYZ stock for $50 per share (total cost: $5,000). The stock has now appreciated to $100 per share (total value: $10,000). If you sell the stock, you'll have a gain of $5,000 ($10,000 - $5,000) and potentially pay capital gains tax on that amount, say 20%. You are now left with $9,000.
If you usually give $10,000 to charity, the better option would be to donate the 100 shares directly to charity.
If you donate the stock directly to a charity, you'll get a tax deduction for the full fair market value (FMV) of $10,000, without paying tax on the gain. (People save millions this way!)
Of course, this only makes sense in cases where you were planning to give 10,000 to charity regardless. Otherwise you’re spending $1 to save $0.37. Don’t do it!
(The number of people that don’t seem to get this is staggering. Never spend on crap you don’t need just to save on taxes! Congrats, You’re now poorer but at least you didn’t pay taxes 🙄)