Donate Long-Term Appreciated Securities

A Win-Win in Charitable Giving

Donating long-term appreciated securities directly to charity — rather than selling the assets and donating the cash proceeds — is one of the best and easiest ways to give more. 

 

Why donating stocks and other securities is one of the most tax-efficient ways to give

A charitable contribution of long-term appreciated securities — i.e. stocks, bonds and/or mutual funds that have realized significant appreciation over time — is one of the most tax-efficient of all ways to give. This method of giving has become increasingly popular in recent years because of two key advantages:
·     -    Any long-term appreciated securities with unrealized gains (meaning they were purchased over a year ago, and have a current value greater than their original cost) may be donated to a public charity and a tax deduction taken for the full fair market value of the securities — up to 30% of the donor's adjusted gross income.
·     -    Since the securities are donated rather than sold, capital gains taxes from selling the securities no longer apply. The more appreciation the securities have, the greater the tax savings will be.

 

Donating Appreciated Securities: A Win-Win for Donors and Charities Alike (1)

The table below illustrates potential tax savings for a couple with an AGI of $500,000, filing jointly, making a direct donation of a long-term appreciated security — with cost basis of $20,000, and long-term capital gains of $30,000 — to a qualified charity.
 
  Donate Stock: Contribute securities directly to charity Donate Cash: Sell securities and donate proceeds

Current fair market value of securities                  

 $50,000 $50,000

Capital gains and Medicare surtax paid(2) (23.8%)

$0 $7,140

Charitable Contribution/Charitable Deduction (3)

$50,000 $42,860

Value of Charitable Deduction Less Capital Gain Taxes Paid (2) (Assumes donor is in the 39.6% federal income tax bracket).

$19,800 $9,833

 

 

 

 

 

 

 

 

 

In this case, the donation of appreciated securities to a charity resulted in a greater benefit to charity and a lower cost to the donor. That’s a Win-Win.

 
If you do have a stock that is a winner, that you think is going to be a bigger winner in the future, you may still make a contribution of that stock and keep it in your portfolio. How? Simply buy it back after you make the charitable contribution. Also, you can use closely held stock, though it is more complicated.
 
The bottom line is that the government has made these deductions available as an incentive for us to support our favorite charities. If giving appreciated stock allows you to give more at a lower cost, then it is definitely something to consider.
 
We suggest you speak with your financial consultant about this opportunity before contacting us. If you have questions, feel free to call 614-848-4870 and ask for our CFO, Jeff Lashley.

 

Footnotes:

(1) This is a hypothetical example for illustrative purposes only. State and local taxes, the federal alternative minimum-tax and limitations to itemized deductions applicable to taxpayers in higher-income brackets are not taken into account. Please consult your tax advisor regarding your specific legal and tax situation. Information herein is not legal or tax advice.

(2) Assumes all realized gains are subject to the maximum federal long-term capital gain tax rate of 20% and the Medicare surtax of 3.8%. Does not take into account state or local taxes, if any.

(3) Availability of certain federal income tax deductions may depend on whether you itemize deductions. Charitable contributions of capital gain property held for more than one year are usually deductible at fair market value. Deductions for capital gain property held for one year or less are usually limited to cost basis




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