More Than Ever, Now Is A Great Time To Donate Stock

Even with the wild recent swings, stock markets are generally very strong, which is great for portfolios but can also pose challenges when it is time to sell. Investors may face significant capital gains taxes on stocks that have accumulated value. A great option can be to donate appreciated stock. Always consult with your tax or financial advisors to determine the best strategies for you.


The simplest explanation is that the value of donated stock is its fair market value, and you don’t pay capital gains tax on a donated stock’s accumulated value. Consider this scenario:

You purchased $25,000 of stock. Today, that stock is worth $75,000. You’ve made $50,000 on your very smart investment! You could sell the stock, but you’ll be taxed on the capital gains of $50,000. Right now, that likely is a $7,500 tax, or possibly more. However, if you donate the stock, you’d be able to count the entire value of the stock, $75,000, as a charitable deduction. If you are in the 33% tax bracket, that’s a potential tax savings of $24,750, and you would also not pay that capital gains tax of $7,500 had you simply sold the stock. This does not even include savings you may also recognize on your state income or capital gains taxes! And, in support of the organization, you’re now making a donation that is three times what you initially paid.


How does this fit into a larger giving strategy? The 2018 tax law changes affect many people, particularly in regards to the higher standard deduction, which nearly doubled. For many people, “bundling” several years of giving together into a single year may allow them to exceed those higher deduction levels. Read our April issue of Giving From The Heart online for more information about the 2018 changes!

Is my portfolio balanced? Some people may have stock options from an employer, which is a wonderful benefit but can also skew your overall portfolio compared to if you’d maintained a more diverse portfolio. You could face a high capital gains tax if your unbalanced stock has appreciated a great deal. You may be better off donating it!

Have I owned the stock longer than one year? You generally must have held the stock for one year, or the value of the donation would be the cost of the stock ($25,000, in the example given), not the fair market value.

Have I asked my advisor? Please consult with your tax or financial advisors to determine the best strategies for you. By making a donation of appreciated stock, you can make a meaningful difference to the individuals that Wheeler serves, while enjoying financial benefits for yourself. With markets this high, now is the time to plan ahead!

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