Did you know that there are benefits and limitations when you decide to donate stock? Learn more about your options.

Key Takeaways

  • Some universities and major hospitals have huge endowments while your local shelter may struggle to keep its doors open. Sometimes finding smaller charities with bigger needs may increase the impact of your donation.
  • Donating stock can provide potential tax benefits, especially if you have owned the securities for at least one year.
  • While cash gifts are generally deductible up to 50% of adjusted gross income, the actual tax savings may vary based on your tax bracket and state taxes.

Why sell shares when you can gift them? If you have appreciated stocks in your portfolio, you might want to consider donating those shares to charity rather than selling them.

Donating appreciated securities to a tax-qualified charity may allow you to manage your taxes and benefit the charity. If you have held the stock for more than a year, you may be able to deduct from your taxes the fair market value of the stock in the year that you donate. If the charity is tax-exempt, it may not face capital gains tax on the stock if it sells it in the future.1

Keep in mind this article is for informational purposes only. It’s not a replacement for real-life advice. Make sure to consult your tax and legal professionals before modifying your gift-giving strategy.

“The greatest donor satisfaction may come with a combination of time and money.”

There are several reasons to consider donating highly appreciated stock to a tax-exempt charity. For example, you may own company stock and have the opportunity to donate some shares. There also are potential tax benefits to consider if you donate appreciated securities that you have owned for at least one year.

If you sell shares of appreciated stock from a taxable account and subsequently donate the proceeds from the sale to charity, you may face capital gains tax on any gain you realize, which effectively trims the benefit of cash donation.1

When is donating cash a choice to consider? If you provide the charity with a cash gift, there may be some limitations. Cash gifts are generally deductible up to 50% of adjusted gross income. As an example, if a donor in the top 37% federal tax bracket gives a 501(c)(3) non-profit organization a gift of $5,000, the net may be $3,150 with $1,850 realized in tax savings. A donor should also need to consider state taxes in addition to federal.2

If you donate shares of depreciated stock from a taxable account to a charity, you can only deduct their current value, not the value they had when you originally bought them.1

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Remember the tax rules for charitable donations. If you donate appreciated stock to a charity, you may want to review IRS Publication 526, Charitable Contributions. Double-check to see that the charity has non-profit status under federal tax law, and be sure to record the deduction on a Schedule A that you attach to your 1040.1

If your contribution totals $250 or more, the donation must be recorded – that is, the charity needs to give you a written statement describing the donation and its value and whether it is providing you with goods or services in exchange for it.2

If your total deduction for all non-cash contributions in a tax year exceeds $500, then complete and attach Form 8283 (Noncash Charitable Contributions) to your 1040 when filing. If you donate more than $5,000 of property to a charity, you will need to provide a letter from a qualified appraiser to the charity (and by extension, the IRS) stating the monetary value of the gift(s).2

Gifting cash or other assets to an organization is a wonderful opportunity. But keep in mind that tax rules are constantly being adjusted, and there’s a possibility that the current rules may change. Make certain to consult your tax and legal professionals before starting a new gifting strategy.

1. IRS.gov, 2023
2. IRS.gov, 2023
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

When do you need a will?

The answer is easy: Right Now.

You may be wondering if it’s time to draw up a will. Even if you don’t have a large net worth. 

Watch video…

When Do You Need A Will - Video Image

Years ago, I hosted a family holiday gift exchange that ended up an epic fail. In the spirit of taking the focus off buying gifts and instead creating memories, I implemented what I thought would be a fun experience of a random gift exchange. I was hoping to take the pressure off family members to buy everyone a gift, and I hoped making a fun memory would be a gift itself.

Unfortunately, I found out the joy of gift giving is different for everyone. While I gravitate toward creating experiences and spending time with those I care about, others truly enjoy searching for the perfect gift to buy someone they care about. While I thought I was gifting my guests with a new memory and experience, others felt they were stripped of the opportunity to give intentional gifts and the joy of watching the recipient receive it.

Admittedly, I am always on a quest for a fun, but economical, holiday experience. As a financial advisor, I believe the holidays can be an opportunity to indulge in what brings you and others joy – as long as its within your financial means. But our culture around the holidays has turned more toward finding “the perfect gift,” often at the sacrifice of our own financial wellbeing.

In 2018, the U.S. household debt was at an all-time high of $13.2 trillion.The persistent consumer culture that has influenced beliefs, spending habits and thoughts around the holidays for decades has further perpetuated our habits of overspending. While most of us love giving as much – if not more than – receiving, we feel increasingly pressured to spend more than we have in order to do so.

So this year, I urge you to consider – and even discuss with your family and friends – what gift-giving and receiving means to them. Some of my favorite ways to redefine the idea of material gifts include:

  • Start holiday traditions that build memories – spend time together making cookies or enjoying a holiday light walk.
  • Provide options to buy less – my gift exchange was a failure because I didn’t take into account everyone’s feelings. Some guests enjoyed it – we’ve since modified it to involve only those who choose to participate. Others who have the means and desire to give gifts to everyone or pick out meaningful gifts can still enjoy the gathering as well.
  • Give the gift of time – serving as a family at a food kitchen, going to an escape room, ice skating together, theater tickets and a Boone Valley train ride are all wonderful family experiences that create memories for a lifetime.
  • Create ideas together – talk about what the holidays mean to you with your loved ones and focus on those things. It may surprise you how much less “things” mean than time together. 

Wishing you a wonderful, and memory-filled, holiday season!

Securities and Advisory Services through Harbour Investments, Inc.  Member SIPC.

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