Is it time to make your yearly donation to your
favorite charity? Have you ever considered donating your
securities (i.e. stocks and mutual funds) as an
alternative to cash. Many charities accept
securities as a donation, and there might be additional tax
advantages associated with it.
So, when is it better to donate securities over
Well, that all depends on whether you have gained
or lost money on the investments.
If your securities
have increased in value since you purchased it,
it is better to donate the securities to charity.
Benefits When Securities Have Increased In Value
- When you donate your securities that has appreciated
in value, you do not have to pay federal or state
tax on the capital gains.
- You deduct the full market value of the securities
from your income taxes. **Important** In order
to take advantage of this benefit, appreciated
securities must be held for over one year. Please
note that tax laws consistently change, and it is
advised to check with your tax advisor.
- You are making a donation that is lower than what
you initially paid for.
If your securities
have decreased in value since you purchased it,
it is better to sell the securities first and then
donate the cash.
Benefits When Securities Have Decreased In Value
- When you sell securities at a loss, you'll be able
to utilize the loss to offset capital gains or
deduct the capital loss versus income up to
$3,000. Please note that tax laws
constantly change, and it is advised to check with
your tax advisor.
- And you will still be able to deduct the cash
The Math When Securities Have Increased In Value
Here is an example of how you can benefit from
donating security instead of cash.
||Sell $5,000 in
Security and Donate Cash Proceeds
||Donate $5,000 in
||Federal Capital Gains Tax Paid @
||State Capital Gains Tax Paid @
||Total Tax Paid
||Federal Income Tax Saved @ 28%
||State Income Tax Saved @ 5%
||Total Tax Saved
||Net Tax Saving Line 11 less Line
As you can see, in this example, you save over $1,000
in taxes by donating the security directly instead of
selling the security and then donating the remaining
amount net of taxes in cash.
Instructions On Donating Securities
- You must be itemizing your tax deductions to take
advantage of the benefit
- Again, securities must be held over a year
- Make sure the charity is a registered 501(c)(3)
charity or qualified religious organization that can
lawfully accept your donation and from which you can
get a tax deduction
- Contact your charity for instruction on donating
- Please contact your financial or tax adviser, who
can assist you in evaluating the tax advantages
available to you.
Examples Of Charities Willing To Accept Securities
- American Red Cross (www.redcross.org/donate/donatestock.html)
- Global Fund for Women (www.globalfundforwomen.org/cms/content/view/215/208/)
- Save the children fund (//www.savethechildren.org/donate/stock.html)
- Emergency Family Assistance Association (www.efaa.org/pages/donation_stock.htm)
- North Shore Animal League America (www.nsalamerica.org/donate/donate_stock.html)
Additional Information About Contributions From
“The amount of your deduction is limited to 50% of
your adjusted gross income, and may be limited to 30% or
20% of your adjusted gross income, depending on the type
of property you give and the type of organization you
give it to.” See Publication 526 Limits on Deductions
for more information.
- Section 501(c)(3)
- Charitable institution of
the IRS Tax Code
- Publication 550
- Investment Income and
526 - Charitable Contributions Capital
- Form 8283
- Noncash Charitable Contributions
- Charity Navigator