Gifting Restricted Stock Units To Charity

For employees who receive equity compensation, restricted stock units (RSUs) can make up a significant share of overall wealth and an equally significant tax bill once those shares vest. As equity compensation has become more common across industries, more donors are sitting on appreciated stock without a clear sense of how to put it to work philanthropically. 

For charitably minded donors, vested stock can become something more than compensation: a meaningful philanthropic asset, especially when paired with a donor advised fund and guidance from Greater Houston Community Foundation. The right approach can depend heavily on timing, holding periods, and how your company structures vesting and trading windows, which is why so many donors choose to coordinate with both their tax advisor and a philanthropic partner before making a move. Done thoughtfully, gifting vested shares can reduce tax exposure while directing real, lasting value toward the causes you care about most.

Key Insights

• Restricted stock units generally cannot be donated to charity until they vest and convert into actual shares of stock.
• Once RSUs vest, the fair market value of the shares is treated as ordinary income, which is why many recipients feel surprised by the size of their tax bill.
• Donating vested shares—rather than selling them and donating cash—can help reduce or avoid capital gains tax on any appreciation since vesting.
• A donor advised fund at the Community Foundation can separate the timing of a stock gift from the decision of which charities to support, giving donors more flexibility.
• Careful documentation and an understanding of IRS rules are essential any time you’re contributing appreciated stock or other noncash assets to charity.

Table of Contents

• What are restricted stock units?
• Gifting shares to a charity: Is it possible with restricted stock?
• Why are RSUs taxed so high?
• Can you cash out restricted stock units?
• How the Community Foundation can help turn RSUs into charitable impact
• Gifting restricted stock units: examples and options
• Evaluating an RSU gift step-by-step
• Mistakes to avoid when giving RSUs
• FAQ about gifting restricted stock units
• Need sophisticated philanthropic guidance? Let’s talk.

What are restricted stock units?

Restricted stock units, or RSUs, are a form of equity compensation that many employers use to attract and retain talent. Rather than receiving company stock outright, employees are granted the right to receive shares once certain conditions (usually continued employment over a set period) have been satisfied.

The RSU lifecycle generally follows a familiar pattern:

1. Grant date. The date your employer formally awards you the RSUs, along with the schedule you’ll need to meet before they convert to shares.
2. Vesting date. The date (or dates, if vesting happens in stages) when you actually earn the right to the underlying shares.
3. Shares delivered. Once vested, actual shares are deposited into your brokerage account.
4. Hold or sell. From there, you can hold the shares, sell them, or donate them to a charitable organization if eligible. 

This timeline is tremendously important for any significant charitable planning. Unvested RSUs are simply a promise of future shares; you don’t yet own anything you could give away. Once the shares vest and land in your account, however, they behave much like any other stock you might hold, which opens the door to a range of obligations and even more charitable giving strategies.

Gifting shares to a charity: Is it possible with restricted stock?

This is one of the most common questions equity compensation recipients ask, and the honest answer is: it depends on timing. In most cases, you cannot donate unvested RSUs themselves, because the underlying award isn’t transferable before vesting. What you can donate are the shares you receive after vesting and doing so can be incredibly efficient.

It helps to separate these two scenarios clearly:

• Donating unvested RSUs. Generally not permitted. Since you don’t yet hold the shares, there’s nothing to transfer to a charity or donor advised fund. While the Community Foundation cannot accept unvested shares, we can help you develop a timeline and a giving plan for when they do. 
• Donating vested shares. Often very possible, and frequently advantageous from a tax perspective, particularly once the shares have been held for more than a year.

Donating stock to charity that has appreciated in value can create a dual benefit: you may be eligible for a deduction based on the shares’ fair market value, while also potentially avoiding capital gains tax you’d otherwise owe if you sold the stock first. Gifting vested shares to a donor advised fund can create that immediate tax benefit while still allowing your charitable support to be distributed to nonprofits over time, on your own schedule.

Why are RSUs taxed so high?

RSU recipients are often caught off guard by how much they owe in taxes the year their shares vest, and the underlying explanation is straightforward: the IRS treats the value of vested RSUs as ordinary income, similar to wages or a cash bonus, not as a capital gain.

That income is generally subject to several layers of tax:

• Federal income tax, assessed at your marginal rate based on total taxable income for the year.
• Local taxes depending on where you live and work.
• Payroll taxes, including Social Security and Medicare, much like a portion of your regular paycheck.

Part of the surprise comes down to withholding. Employers often withhold taxes on RSU income using standard supplemental wage rates, which may be lower than your actual marginal tax bracket. That gap between what’s withheld and what’s actually owed can lead to an unexpected bill at tax filing time, even though taxes were technically withheld when the shares vested.

Consider a simple example: if 100 shares vest at $50 per share, that $5,000 is generally treated as compensation income for that tax year, regardless of whether you hold or sell the shares afterward. This is also why the charitable giving tax deduction available for a subsequent stock donation can be so valuable: it offers a way to offset some of that income tax exposure while directing the value toward causes you care about.

Can you cash out restricted stock units?

Once your RSUs vest and shares are delivered to your brokerage account, you generally have the ability to hold the shares or sell them, subject to any trading policies, blackout windows, or other restrictions your employer may have in place.

For employees at private companies, the picture can look a little different. Selling vested shares may depend on a liquidity event like a tender offer or initial public offering, or may be restricted by a company-specific trading window. If you’re navigating equity in a private company or need guidance on how to invest in privately held companies, talk to your advisors for additional context as you think through your options.

How the Community Foundation can help turn RSUs into charitable impact

Equity compensation can create a uniquely advantageous moment for charitable giving, but maximizing that opportunity usually requires more than a single transaction. We help donors think beyond the immediate tax event and toward longer-term philanthropic goals.

A donor advised fund can separate the timing of your tax-related decisions from your timeline for grantmaking, which means you don’t have to decide which nonprofits to support the same day you make your contribution. This flexibility allows your charitable strategy to evolve at its own pace, even as the tax benefits of your gift are realized in the year you contribute.

Beyond facilitating the transfer itself, we’re here to help you make the most of your generosity.

• Deep local insight, broad perspective
  We bring a strong understanding of Houston’s most pressing needs, alongside access to trusted opportunities across the country and around the world so your giving can reflect what matters most to you.
  
• Guidance shaped around your goals
  Our team works alongside you to understand your values and vision, offering personalized support that helps translate your intent into meaningful, lasting impact.
  
• Flexibility to grow with you
  Your giving can evolve over time. We make it easy to support different causes as your interests and priorities change without locking you into a single path.
  
• Seamless coordination with your advisors
  We collaborate closely with your financial and tax professionals to ensure a smooth process, including support for more complex gifts like appreciated securities.

We also work with donors whose equity compensation includes privately held shares, which can involve additional valuation and documentation considerations compared to publicly traded stock.

As one donor put it:

“Through working with the Community Foundation, I get to leverage the expertise of people who work in the philanthropic space all day, every day. Their philanthropic advisors have deep local knowledge and skills that I don’t have, and I feel fortunate to pull from their expertise.”
Chris Weekley, former Governing Board Chair and Community Foundation Fundholder

That kind of partnership is exactly what we aim to provide: a steady, knowledgeable presence that helps your equity compensation work harder for the causes you care about.

Gifting restricted stock units: examples and options

Once your RSU shares have vested, you generally have three paths available if you’re considering a charitable gift. Each comes with its own trade-offs, summarized below.

For many donors, contributing appreciated shares to a donor advised fund offers the most flexibility. It can be especially appealing if you want to involve family members in grant decisions, bunch several years of giving into a single tax year, or simply take time to research the nonprofits you ultimately want to support.

Before making a decision, we encourage you to have a conversation about what approach may be best for your situation. If you’re still weighing whether selling first or donating shares directly makes more sense, our philanthropic advisors are here to walk you through the considerations in more depth. 

Continue reading: Can you donate stocks to charity?

Evaluating an RSU gift step-by-step

Before making a decision about your vested shares, it helps to work through a structured set of questions with your advisors. The following framework can serve as a useful starting point.

1. Confirm the shares are actually vested. As we’ve mentioned, unvested RSUs cannot be transferred or donated.
2. Check whether you’re permitted to transfer or sell right now. Review any blackout periods or company-specific trading restrictions that may apply.
3. Determine how long you’ve held the shares since vesting. This affects whether the appreciation is treated as short-term or long-term for tax purposes.
4. Compare donating shares directly versus selling and donating cash. Each path has different tax implications, as outlined above.
5. Consider whether a donor advised fund at the Community Foundation is the right vehicle. This can be especially useful if you want to support multiple nonprofits, bunch gifts for tax purposes, or build a more intentional giving plan over time.
6. Review the required tax documentation.Noncash charitable contributions like appreciated stock come with their own substantiation requirements, and gifts above certain thresholds require additional IRS forms.

Working through this framework with your tax advisor, financial planner, and our team of philanthropic advisors can help ensure that your gift achieves the outcome you’re hoping for, both financially and charitably.

Mistakes to avoid when giving RSUs

Even well-intentioned donors can run into avoidable complications when gifting equity compensation. Some of the most common missteps include:

Many of these pitfalls come down to timing and documentation—areas where a thoughtful conversation and experienced guidance can make all the difference. That’s where the Community Foundation can help.

FAQ about gifting restricted stock units

Are RSUs really worth it?

For most employees, RSUs are a valuable form of compensation despite the tax complexity, since vested shares carry real, transferable value. The key is understanding the tax treatment at vesting so you aren’t caught off guard, and planning ahead for opportunities like giving, which can help offset some of that tax exposure.

What are the IRS rules for donating stock to charity?

The IRS allows donors to deduct the fair market value of appreciated stock held longer than one year, subject to AGI-based limitations. Noncash gifts over $5,000 typically require a qualified appraisal and completion of Section B of IRS Form 8283—this, however, does not apply to RSUs settled in publicly traded stock. IRS Publication 526 outlines recordkeeping and reporting requirements in more detail.

How is the deductibility of appreciated stock determined?

Deductibility generally depends on how long you’ve held the shares. Stock held more than one year is typically deductible at full fair market value, up to 30% of your AGI, with any excess eligible to carry forward for up to five additional years. Shares held one year or less are generally limited to your cost basis rather than fair market value.

What are the benefits of donating appreciated stock?

Donating appreciated stock allows you to potentially avoid capital gains tax on the appreciation, claim a deduction for the full fair market value, and direct more of your wealth toward causes you care about rather than toward taxes. These advantages are part of why stock gifts remain one of the most tax-efficient ways to support charitable causes.

Continue reading: Charitable giving tax strategies 

Need sophisticated philanthropic guidance? Let’s talk.

The central question with RSUs and charitable giving usually isn’t whether a gift is possible, it’s a matter of when and in what form. While unvested RSUs are not suitable for giving, vested shares that follow can become a genuinely powerful philanthropic tool, particularly when the timing, holding period, and documentation are handled thoughtfully.

Before acting on any RSU-related charitable strategy, we encourage you to connect with the Community Foundation early. We’ll work alongside your tax advisor and financial planner to help you align the details and turn vested equity into lasting charitable impact.

Ready to explore how a donor advised fund could fit into your equity compensation strategy? Call the Community Foundation today at 713-333-2210 or reach out directly to get started.

More Helpful Articles by Greater Houston Community Foundation: 

• How Does Charity Help With Taxes?
• What’s the Difference Between a Designated Fund vs. a Field-of-Interest Fund?
• Why Keep Charitable Giving During Market Volatility
• Connecting Estate Planning and Charitable Giving
• Choosing the Right Strategy for DAF Investments

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