If you have appreciated stock or mutual funds in your taxable account, you will have to pay capital-gains tax if you sell them. However, by donating appreciated securities directly to a charity you can forgo paying tax as long as you have held the securities for more than one year. (The deduction is limited to 30% of your adjusted gross income for most charities, rather than the usual 50% limit; consult your tax advisor or see IRS Publication 526, Charitable Contributions for details.)

The benefit of this type of donation is equal to the value of the tax deduction. If you donate $10,000 worth of a mutual fund and you paid $5,000 for the shares, you avoid a $5,000 long-term gain, saving $750 at the 15% tax rate. The charity, since it is tax-exempt, can sell the shares itself and pay no tax.

Note that if you have shares with a loss, you should not donate them to charity; instead, you should sell them, claiming the capital loss which will reduce your taxable income, and then donate the sale proceeds to the charity.