Donating Appreciated Stock
While donating cash may be the easiest form of gifting, it may not be the most tax advantageous form of gifting. If you own appreciated stock in a brokerage account (not a retirement account), you may consider gifting stock instead of cash. That’s because you may be able to avoid paying long-term capital gains taxes when gifting appreciated stock. You must have held the appreciated stock for at least 12 months for this tax strategy. Also, you generally cannot reduce your Adjusted Gross Income by more than 30% when donating appreciated securities.
Let’s say you own shares in XYZ Technology Corporation and you originally paid $1,000 for your shares three years ago. Today, XYZ is worth $2,000. If you sell XYZ, you may owe capital gains taxes on the $1,000 long-term gain. At a 15% tax rate, you would have $1,850 left after selling XYZ and paying your tax. However, if you gift your shares of XYZ to charity instead of selling them, you would generally not owe long-term gains taxes, plus you may be able to deduct the full $2,000 value of XYZ on your tax return. For this reason, gifting appreciated securities is often superior to gifting cash. Remember, if you still want to own XYZ shares, you can simply buy the shares again using the cash you would have donated to charity if you hadn’t gifted your XYZ shares.
While many people gift appreciated stock to a Donor Advised Fund for ease and flexibility, if you want to gift stock directly to TFS, please contact our Business Manager, Sarah Doyle, at [email protected] and we’ll help you with the process.
Please speak with a tax, legal or financial professional before making any changes to your personal situation. This information is being provided as informational material and should not be construed as a recommendation or advice.