Stock donations to charity are a smart way to give back to your community.
A stock donation can enable you to give more, save on the capital gains tax, and rebalance your income portfolio.
Here are 3 reasons you should give stock donation a try:
1.You can give more.
By donating stock that has appreciated for more than a year, you are actually giving 20 percent more than if you sold the stock and then made a cash donation.
The reason is simple: avoiding capital gains taxes. The maximum federal capital gains tax rate is 20 percent on long-term holdings. Given that the Dow Jones Industrial Average rose from about 18,000 at the end of March 2015 to over 30,000 in December 2020, you are likely to realize a taxable profit on the sale of assets you purchased in the past five years.
But if you donate the stock directly to a charity, there’s no capital gains tax to pay. Plus, you are still eligible to deduct the full fair-market value of the asset you donated from your income taxes, up to the overall amount allowed by the IRS.
And remember that your appreciated assets can also include assets that are not publicly traded, like restricted stock or bitcoin.
2. You can potentially reduce future capital gains.
Many investors have stocks that they love and want to hold for the long term. Any appreciation of that stock’s value confirms your belief in it, but it can also set the stage for substantial gains when you sell.
So consider donating some of your appreciated shares and then buying new shares to reset your cost basis at the current, higher price. This will reduce your future capital gains tax exposure if the stock continues to grow in value.
3. You can give your portfolio a health check.
Even with a good diet and regular exercise, your health can get out of balance. So, too, can your stock portfolio.
If a review of your investments’ gains and losses shows that it’s time to rebalance your portfolio to maximize its performance and optimize for risk, donating stock can give your portfolio the health check it needs. Implementing a donation strategy puts your capital gains to work funding your philanthropy. Talk to your advisor about which assets to put to a better use.
What is the process for donating stock to charity?
Your broker can assist you in making a gift of non-cash assets via a direct transfer to Miriam. Talk to your broker about what stock donation works best for you and can make the greatest impact.
Then contact Development Director Heather Kemper at email@example.com. We will provide the information you need to make your transfer and issue a tax deduction receipt. Then, Miriam will put your generosity to work by serving our unique learners.
The transfer of charitable gifts must be completed by December 31 to obtain a deduction for the current tax year. For tax purposes, electronic transfers from your brokerage account are recorded on the day it is received by the charity, not when you approve the transfer.
Your generosity allows Miriam School & Learning Center to continue to empower unique learners by building confidence and a foundation for success.
Information obtained from Fidelity Charitable. As always, please be sure to discuss any decisions with your financial planners.
Contact Heather Kemper, Director of Development, for instructions on donating securities to Miriam: mailto:firstname.lastname@example.org or 314.962.6059.