Every year about this time, my family and I sit down and decide our annual giving plan: how much can we afford to donate this year, and to which charities will we give? When the kids were small we told them what we were doing so they’d appreciate their good fortune, that most people don’t have what we have and many simply don’t have enough, and that these folks depend in part on people like us to help. As the kids got older they found causes of their own— spinal injury research, protecting dolphins and tigers, addressing climate change— and we encouraged them by donating in their names to those as well.
When most people give to a non-profit, for the sake of simplicity they write a check or just put the donation on a credit card. But did you know that many non-profits, particularly larger ones with more healthy and updated infrastructure, accept gifts of stock directly?
Sounds weird and complicated; what's the point? If you sell a stock during the year which is worth more than you paid, you’ll be on the hook for capital gains taxes on that sale. Sure, you can then use the proceeds from that sale for charitable giving. But you will have paid capital gains tax on investment dollars to be given away, making your gift that much more costly. And you can write off the dollar value of the charitable gift itself, but not for the difference between that and the value of the sold shares.
If instead you donate appreciated stock shares directly, you’ll pay no gains tax (you didn’t sell it, so you never realized the gain) and you can deduct the entire value of that stock gift at the time you gave it from your taxable income. In other words, depending on your gains tax rate, most of us would save 15-20% right there, plus the charity gets a gift of larger total value. Then the non-profit can choose to hold those stock shares for future gains, or sell it themselves for the cash. Read more details here.
So when you are researching the charities you like online, look for those that can accept donations of stock.. sometimes that option requires a little digging. Or locate a live chat or donation hotline and ask.
Give as much as you can. Do it efficiently for them as well as for you. And do it every year.