Tax Efficient Donations to Charity--a Win Win!

Katie Brennan |

We are fortunate that many of the individuals and families with whom we work are inclined to give back to our amazing community.  That being said, we want to ensure you are aware of some tax efficient ways to make charitable contributions.

Appreciated securities are investments that have increased in value from the time they were purchased. For example, if a stock or mutual fund was purchased for $30 per share and sold for $50 per share, the security has appreciated by $20 per share. When appreciated securities are sold in non-qualified (taxable) accounts, the owner generally realizes capital gains equal to the appreciation and may be liable to pay capital gains tax.  From our example above, the $20 per share could be subject to capital gains taxes at both the Federal and State levels. 

Taxpayers who are considering current year charitable contributions and are also facing long-term capital gains taxes on appreciated securities that they have held for more than a year can realize a much more favorable income tax result and charitable impact by making a timely donation of the appreciated stock directly to charity.

If a donor contributes appreciated stock held for more than one year directly to a public charity, the donor can usually* deduct the fair market value of the donation without realizing any capital gain.  This is a win-win as you don't get hit with the capital gains tax and the charity receives more of a donation.

Click here for an example in chart form.  You may also click here to review the Charles Schwab Quick Guide to Charitable Tax Planning. 

There are also strategies for making direct charitable donations with a portion of your required minimum distribution from your IRA account.  Please click here for more information regarding qualified charitable contributions and contact us if you would like to discuss further.

We hope you found this information helpful.  We are here and happy to help if you want to make donations of your appreciated investments directly to charity. We appreciate your continued trust and support. 

*Please note: we are not CPAs. Please speak with your accountant before considering this option.