By Stacy Francis, Francis Financial, Inc., www.FrancisFinancial.com
While donating money to worthy causes is something we think is great; gifting to charities can be greater still when you donate appreciated stock instead of cash. The tax advantages can be worth it. That’s because as long as you have held the shares for twelve months, you can take a deduction worth their current market value. Let’s explain how this works.
Writing a Check to Your Favorite Charity
Consider this, you bought 1,000 shares of stock ten years ago with a cost basis of just about nil. If you sell the stock for $200,000 and give the proceeds to charity after paying the capital-gains taxes (15%), the charity gets only about $170,000, and you get a $170,000 tax deduction. Not bad, but we can do even better.
Gifting the Stock Outright to Your Favorite Charity
If you give the stock to the charity, which is tax-exempt, it can sell the shares and keep the whole $200,000. And you get a $200,000 deduction. This is what we call a win-win situation.
Typically, selling an appreciated stock triggers a tax on the realized gain, the difference between what you paid to purchase the stock and its current value. When you make a gift of appreciated stock directly to your favorite charity and the charity sells the stock, the taxable event and the fees are avoided because the charity is tax-exempt. Plus, you can take a sizeable charitable deduction on your taxes.
How It’s Done
To donate stock, you just have to transfer ownership of the shares. That may be easier said than done, but don’t become discouraged. We at Francis Financial, Inc., can do this for you, making everything as effortless as possible.
You might also consider using a Charitable Trust. These gift trusts allow you to transfer the stock to the trust and take the appropriate deduction for the appreciated value of the shares. The trust then writes a check to the charity for the donation amount that you would like to make.
Using a gift trust is especially helpful when you are donating a significant amount of stock or if you have a number of charities to which you want to make a charitable contribution.
Gifts of Stock Are Popular for Donors of All Ages
• The young donor saves through both the charitable deduction and the hard cash he or she is freeing up.
• The middle-aged donor can create a charitable remainder trust (CRT) with donated stock and with the income received from such a CRT is able to fund his or her child’s or grandchild’s education.
Which Stocks to Give?
If you’re planning to donate stock, choose carefully which shares you give. First, make sure that you have held the shares for at least one year. Next, review how much the shares increased in value. If the stock actually dropped below the price at which it was initially purchased, it is better to sell the stock. Once you sell the shares you can take a capital loss on your tax return and donate the proceeds directly to your favorite charity.
We believe that charitable giving is just another part of a rich life. Give to your favorite charity, feel good about yourself, and save tax dollars at the same time.
Stacy Francis, Francis Financial, Inc.
111 John Street, Suite 240, New York, NY 10038
Phone: 212-374-9008 Fax: 646-219-6799
Stacy@FrancisFinancial.com
