Why Donating Securities to Charity is a Smart Strategy

An increasingly popular strategy for charitable giving–especially in a rising stock market–is to donate securities to charity.  Aside from the obvious philanthropic benefit of supporting an organization or cause that you are passionate about (e.g., Richmond Tennis Association, Goochland Pet Lovers, Breath Matters, James River Hikers-Hiking with History, among so many other great RVA nonprofits), contributing appreciated securities to a 501(c)(3) charitable organization offers two types of tax benefits:

1.  Any long-term appreciated securities with unrealized gains (in other words, they were purchased more than a year ago and have a current value greater than their original purchase price) may be donated to a charity, with a resulting tax deduction taken for the full fair market value of the securities — up to 30% of the donor’s adjusted gross income.  For example, let’s say you bought 100 shares of Disney in 2011 for $4,000, and today those shares are worth $11,200.  If you donate those shares to a 501(c)(3) organization, you are allowed to take a $11,200 charitable gift deduction on your individual tax return.  A nice “step-up” considering you were only $4,000 out of pocket.

2.  Because the securities are donated to charity rather than sold at a gain, capital gains taxes from selling the securities do not apply. Put another way, the more the securities have appreciated in value since you bought them, the greater your tax savings by donating to charity.  In the example cited above,  15% or 20% capital gains tax (depending on your individual tax bracket) would apply to the $7,200 capital gain realized from a sale of those 100 shares of Disney stock.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *