We all know the familiar tax-season rat race: fielding calls from our accountant while we check and double-check our email for any receipts of charitable giving we might have missed, wishing we had kept better track during the year instead of leaving our search until April 10. When we first see the estimate of what we’ll owe this year, we might suddenly wish we had more to deduct.
More deductions mean more money in your pocket, and that means more vacations, more travel, more date nights, and maybe even a new kitchen. Who doesn’t want that?
There’s a way to save more on your taxes even with your existing budget for charitable giving. Simply by donating your appreciating stock instead of cash, you maximize your tax deduction and your impact on the charity of your choice. It’s really that simple – let us walk you through it.
Why Donate Stock Instead of Cash?
If you own appreciated stock, it is almost always better to make a stock donation from your broker than it is to donate cash. Let’s say your annual budget for charitable giving is $10,000, which you usually give as a year-end donation to an organization of your choosing.
Let’s also say that you are the owner of a healthy stock portfolio, including at least $10,000 of appreciated stock. If you want to liquidate this stock for your charitable donation, you would pay a capital gains tax up to 37% of the fair market value of your stock. That’s $3,700 in taxes, leaving you with $6,300 to donate and write off.
Instead, if you donate your $10,000 of appreciated stock, you avoid the capital gains tax entirely. You would write off $10,000 on your taxes, and the organization would receive the full $10,000. That’s an extra $3,700 for you to write off, and an extra $3,700 for the organization to put towards their mission, programming, building maintenance, and more.
Just by donating stock instead of cash, you are increasing your write-off and avoiding capital gains tax. You don’t even have to increase the size of your donation; just the way you donate it.
Stock can be donated to any 501(c)3 nonprofit. In fact, many organizations prefer stock donations, because they are able to keep the full value of your capital, rather than its after-tax value.
What If I Don’t Want To Sell My Stocks?
We understand that – plenty of people have healthy stock portfolios they love. You can donate your existing stock, and use the cash you were planning to donate to buy the same number of shares with your broker. Donating appreciated stocks gives you an opportunity to buy up new shares and void the existing gains.
Can I Donate a Losing Stock?
This isn’t the best idea. If you sell the losing stock, you can take the capital loss on your taxes. Then, you can donate the cash directly to the organization, and write that off as a charitable donation. Donating appreciated stock that you have held for one year or more is the best way to save on your taxes.
Isn’t Donating Stock Complicated?
It certainly doesn’t have to be! You can donate stock manually, in which case you will need to research the correct forms to fill out. You’ll also want to contact your organization ahead of time to make sure they are prepared to donate stock donations – so if you’re doing this yourself, don’t leave your big end of year stock donation until December 30.
If you’d like to donate stock as easily as you can donate cash, there are online services already set up to streamline the entire process. For example, Cocatalyst was founded to make stock donations easier for the donors and the recipients. It’s an entirely free services that takes care of everything, and issues you a tax receipt when the donation is complete.
To donate stock through Cocatalyst, all you have to do is visit their stock donation page; fill out their form; and complete the signature. Your organization can also sign up for a profile with Cocatalyst to streamline all their stock donations – if they haven’t already. They have a completed guide on how to donate stock to a charity.
Anything Else I Should Know?
Of course, remember to take an itemized deduction on your taxes. This is the only way you’ll see the full benefit of your donation.
Alright! When Can I Get Started?
You don’t have to wait until the end of the year – you can donate stock any time! It’s better for your taxes, and has a bigger impact on the organization receiving your donation. Get started today with a service like Cocatalyst for a fast, free, easy experience donating stock.