Ways to Gift Highly Appreciated Assets

Generally speaking, we love to see assets we own appreciate in value—who wouldn’t want their stocks, real estate, or fine art pieces to increase in value?

This increase in value comes with a catch though. When it’s finally time to sell, the more the value has increased the more you’ll owe in taxes on the income generated by the sale. When selling or transferring highly appreciated assets, there are a few important tips and tricks to keep in mind to ensure you don’t find yourself at a disadvantage come tax time.

Key Takeaways

1. Appreciated assets are any property or financial instruments that have increased in value during the time you’ve owned them.
2. When you sell an appreciated asset, you must pay capital gains tax on the appreciated value of the asset.
3. By giving the assets themselves rather than the cash generated by their sale, you can reduce your tax liability while also conferring a variety of benefits on the asset recipient.

What is an Appreciated Asset?

An appreciated asset is an object or other investment that has increased in value since it was acquired. Common examples of assets that appreciate include stocks and real estate, but there are many others, including everything from precious metals to rare works of art.

Who Should Receive My Appreciated Assets?

Because appreciated assets carry more value than when they were purchased, in many cases the owner of the assets will be liable for capital gains tax on the amount by which the asset has appreciated.

In cases where an asset has appreciated considerably, this can sometimes represent a major tax burden for the recipient. Fortunately, there are ways to decrease or entirely avoid this tax liability.

Gifting to Family Members

In certain instances, the tax liability for a highly appreciated asset can be avoided entirely by giving to family members. There are several ways to achieve this:

• Gifting to lower tax brackets. Because capital gains tax is tied to your income level, the tax burden on the appreciated asset’s sale can be greatly reduced or totally avoided if it is gifted to a family member in a lower tax bracket. In 2026, individuals reporting less than $49,450 when filing singly or $98,900 as a married couple do not need to pay capital gains tax on appreciated assets.

• Gifting upstream. Instead of gifting appreciated assets to lower-earning family members, it can sometimes be advantageous to give an asset to an older family member. While they possess the assets, they can reap any benefits and income those assets might generate. Then, when they die, the assets can be transferred to a beneficiary as part of the decedent’s estate at which point it will receive a step up in cost basis.

• Grantor retained annuity trusts. In some cases, you may wish to transfer your appreciated assets into a trust for a certain length of time. Under this type of trust, your assets continue to appreciate while a pre-determined annuity payment and rate of return is disbursed to the trust’s beneficiaries. Once the agreed upon term is reached, appreciation of the assets beyond the annuity payments and returns transfers to the beneficiaries tax-free.

Gifting to Charity

For many investors, well-timed donations to charity can be a huge help in navigating the tax challenges associated with highly appreciated assets. By donating the assets to a charity, individuals can benefit in the following ways:

• Avoiding capital gains. By donating the asset instead of selling it and donating the cash value, it is possible to skip over the capital gains tax you might owe on a highly appreciated asset. The selected charity will benefit even more, as qualified non-profit entities do not pay capital gains tax on the sale of these sorts of gifts.

• Claiming high value deductions. As long as you’ve owned the asset for at least a year, you can claim the full market value of a donated asset to a charitable organization. In cases where you purchased the asset at a much lower price than it would sell, this can have big upsides for your tax situation while also serving an important purpose for the charity.

• Increasing impact on selected charities. Selling an asset and donating the cash will almost always result in less money flowing into the charities you choose to support. By donating appreciated assets, your money will go further in supporting causes that are important to you.

Tax Considerations when Gifting Appreciated Assets

There are a few important things to consider when gifting appreciated assets if you want to make sure you’re protected come tax time.

Capital Gains Taxes

One of the biggest tax implications you’ll encounter when dealing with appreciated assets is the capital gains tax levied on the sale of these types of assets. Make sure you have a plan for covering these obligations when selling your assets, or consult with your financial advisor about how to make donations to family members or charities to improve your tax position.

Cost Basis and Carryover Basis

Cost basis is just another term for the initial purchase price of an asset, plus any associated fees that might accompany the purchase. When an appreciated asset is gifted to another person, that basis is transferred over to the recipient. The transferred basis is referred to as “carryover basis.” This amount is used in calculating how much an asset has appreciated when it is eventually sold. In some cases, like when an asset is inherited, the basis can be increased via a process known as step up in basis. When the basis increases, the difference between the basis and the current market value of the asset decreases, leaving you less vulnerable to capital gains taxes.

Gift Tax and the Annual Gift Tax Exclusion

The annual federal gift tax exemption is $19,000 in 2026—this means an individual can give up to $19,000 to another individual without cutting into their lifetime gifting allowance ($15 million as of this year). Any gift amount given beyond this amount is deducted from the lifetime gift allowance, and if enough money or other assets are gifted to completely deplete an individual’s lifetime allowance then they may be forced to pay gift taxes on any additional giving.

This rule is in place to prevent particularly large estates from being transferred freely from one person to another, and since appreciated assets are counted in your yearly allotment of giving for different people it’s important to keep this in mind when deciding when and how to transfer these kinds of assets.

It’s important to note that the IRS requires individuals to report annual gifts exceeding $19,000 to a single recipient even if they have not depleted their lifetime allowance. Even if you do not owe gift taxes, you may still need to report the gift to the IRS.

State Tax Considerations

While the federal government has its own rules governing gifts, appreciated assets and capital gains taxes, some states may have further requirements or restrictions in place that you’ll need to navigate.

Before making a major gift involving appreciated assets, it’s a good idea to talk with a qualified advisor with specialized knowledge of the tax laws in your particular state. Horizons Wealth Management has a team of financial experts to help advise on exactly this issue and any other wealth management needs.

Common Mistakes to Avoid When Gifting Appreciated Assets

When making a gift involving appreciated assets, it’s important to avoid these common pitfalls:

• Selling appreciated assets when the recipient could avoid paying taxes on the assets themselves.
• Failing to calculate the basis, carryover basis and potential for step up in basis prior to selling or transferring an appreciated asset.
• Failing to report gifted assets on your taxes when required.
• Choosing the wrong assets when selecting what to gift and what to keep in your portfolio.
• Not taking your gift recipient’s tax situation into account when making a contribution.
• Not considering the timing of a gift involving appreciated assets, either for your own tax situation or the recipient’s.

Bottom Line

If you’re considering gifting a highly appreciated asset to a family member, charity, friend or anyone else, it’s important you take the time to choose the right assets, the right recipients, and the right process by which the gift is transferred. If you have questions about making a substantial gift to a person or organization, let the experts at Horizons Wealth Management help you with every step of your financial journey. 

Gifting Appreciated Assets FAQ