As the end of the year fast approaches, you may be thinking about making gifts to qualified charitable organizations as a way to reduce your potential estate and income tax liability while supporting a worthy cause. If you’re considering a stock donation, be careful about gifting the “right kind” of stock and not the “wrong kind.”

When contributing stock that you’ve owned for longer than one year, your tax deduction is determined by the stock’s fair market value. As a result, if you donate stock with a low basis that you’ve held for a long time, the appreciation in value remains untaxed forever. Conversely, if you donate stock owned for one year or less (considered a short-term capital gain) you must use your basis — which generally is your initial cost — as the amount of the contribution.

Therefore, all other things being equal, it’s smart to donate low-basis long-term stock and hold onto high-basis stock, especially if it’s a short-term holding. Suppose, for example, that you bought Stock A years ago for $5,000 and it’s now worth $15,000. Also, you acquired Stock B earlier this year for $10,000 and its current value is $10,500. If you donate Stock B before year end, your deduction is limited to $10,000 (your basis in the stock). However, if you gift Stock A instead, you may deduct $15,000 and never pay tax on the $10,000 in appreciation.

Of course, taxes are only one part of the equation. Nevertheless, efficient use of available tax deductions should be considered.