Donate Stocks to Charity:
5 Reasons Why
Donating stocks to charity is not as well-known as donating cash, but it's even more beneficial. Here's how it can benefit you AND your favorite charity.
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In recent years, the way we deal with our finances has changed dramatically. Increasing numbers of people invest in stocks to grow their money and protect it from inflation. This approach can be beneficial when it comes to charitable donations, too. While it’s not as well-known as donating cash or crypto, it's just as effective for helping out those who need it most.
Donating stock to a nonprofit is usually a tax-wise move
A lot of the wealthy know that one of the best things to do every year is to donate stock to charity. You can get a tax deduction for the full fair market value of the stock, which is often higher than what you paid for it, and avoid long-term capital gains tax. The receiving institution gets more money than it would if you sold the stock yourself or donated cash instead of stock. Plus, selling unwanted shares also eliminates any potential paperwork headaches that come with selling securities on your own—which means less time spent managing your finances and more time doing other things that make you happy!
Timing is everything
Your timing is everything. Donating stocks when they are at their highest value means you can give more to charity and still have enough money to live on. This is a good option if you're looking for an immediate tax deduction, but need cash for other expenses soon after. It may also be the best way to maximize your gift if you're planning on selling your stock anyway in the near future because it allows you to claim the charitable deduction now (which leads to tax savings).
Your gift of stock can make a big difference
The value of your gifted stock is not based on the value of the stock when you donate it. Your charity will receive the full market value of your stock donation, regardless of how much or little that may be at the time.
The value of your gift depends on how many shares you donate and what price those shares are trading for when you donate them. For example, if your company’s stock is worth $15 per share when you donate it and then rises in value to $20 per share after they accept your charitable donations, they will still only use its original price as payment for their endowment or specific program funds—meaning that when you give away 100 shares worth $1500 (at a cost basis) as part of an annual charitable giving plan now worth $2,000 thanks to appreciation, only $1,500 will go into their endowment fund (and then grow).
You get twice the benefit with a double deduction
A lot of the wealthy know that one of the best things to do every year is to donate stock to charity. If you donate stock, you can take advantage of a double benefit. You get twice the deduction and twice the tax benefits. This is because when you give appreciated stock to charity, you receive a charitable contribution deduction equal to the fair market value of your stock donations (generally less than what they paid for it). And if that wasn't enough good news, when you sell the stock later on down the line (and this happens quite often), there won't be any capital gains tax due on those proceeds!
You donate $100 worth of stock to charity that has increased in value over time so that its market value is now $300.
Your approximate tax benefit will be based on the appreciated shares, how much more than $100 was donated.
Saving approximately $60 in taxes (20% x ($300-$100)) which is equivalent to an additional $60 deduction against income for every year until forever!
