Although it’s had its ups and downs, the stock market is trading at record highs. That means many donors may have significant appreciated assets in their portfolio. If you are charitably inclined, this is a perfect opportunity to share the love . . . and your good fortune . . . with your favorite nonprofit organizations. With this one simple planning tool, you can increase the amount of your gift to charity AND increase your income tax deduction.
If you sell your appreciated stock and then donate cash to charity, you will pay capital gains taxes – up to 20% – on your sale, leaving less money to support charity. The smarter strategy is to gift the stock to your favorite nonprofit organization and then have the organization sell the stock. There are several benefits to this strategy:
- If you have held your stock for over a year, you will generally get a tax deduction for the full fair market value of your stock on the date of your gift.
- Because the nonprofit organization is a tax-exempt entity, it will not pay capital gains taxes when it sells the stock. Neither will you.
- The organization will have more money to accomplish its mission, and you will get a larger income tax deduction.
If you are interested in harvesting some of your gains to fund BOTH current year and future giving, opening a donor advised fund at the Community Foundation may be a smarter strategy for you. You can gift appreciated stock to capture those gains, as well as the income tax deduction, this year and fuel your giving for years to come. You can continue to give to your favorite nonprofit organizations in a tax-advantaged way. For more information about setting up a donor advised fund at the Community Foundation, visit our WEBSITE. The Community Foundation of Greater Huntsville is #ASmartPlaceToGive