What Donors Need to Know About Stock Gifting

The concept of donating stock to charity is not new but it is highly underutilized. While some have taken advantage of stock gifting for decades, most investors are not aware of this well-kept personal finance secret. Fortunately this is changing as awareness and popularity of stock gifting is growing.

Here are the key issues every donor should consider when donating stock to nonprofits.

It’s Growing in Popularity

More people are donating stock to charity. Fidelity Charitable reported that 68% of contributions to its charities in 2020 were non-cash assets, either publicly or privately traded. Stock donation to charity is an alternative more investors are becoming aware of.

It Offers Significant Tax Benefits

Every veteran investor knows the financial pitfalls that might come from selling stock. Investors could be responsible for paying capital gains taxes of a portion of their profits, even on appreciated stocks held for a year or more.

If you sell stock and donate the cash proceeds to a favorite cause, your capital gains are taxed before you make the gift. But when you donate stock to a 501(c)(3) instead of donating cash from your sale, you avoid tax on capital gains. In fact, you’ll get a tax deduction for its fair market value.

Charities Receive More Money

Donating stock is also more valuable to the charity you support. By giving the stock instead of selling it and donating the remaining proceeds, you give them the full market value of the commodity. You do this without donating more cash yourself, in which you’d pay the IRS first and then send the charity the proceeds.

Donated Stock Should Have Been Held at Least One Year

If you donate appreciated stock you’ve held for at least a year, you might be able to take a tax deduction for its fair market value at the time of donation — not its cost basis. If you donate a stock you’ve held for less than one year, you can likely only deduct the lower amount between the fair market value and the cost basis. Check with a tax professional to maximize your benefits.

Get in Touch With DonateStock

Need to know more about donating stock to charity? DonateStock can fill you in on all the details and facilitate donations to the causes you care about. Go to our donors page to get started.