Unlock Greater Tax Savings and Philanthropic Flexibility by Donating Appreciated Securities Instead of Cash
In a recent meeting with a tax attorney who volunteers with the Community Foundation, we were reminded of the numerous tax benefits of charitable giving. While gifts of cash add to your itemized deductions and reduce your tax liability, gifts of appreciated stock held for a year or more can have a much greater impact.
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Gifting appreciated stock avoids long term capital gains tax incurred upon sale while also allowing for the full market value of the securities to be realized in your itemized deductions. An example of how powerful the tax benefits of donating appreciated (or low-cost basis) securities is outlined below.
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The gifting of low-cost basis securities into a donor-advised fund (DAF) platform offers the further benefit of separating one’s annual tax decisions from the joy of philanthropy. A gift of securities into a DAF can be used to make gifts to numerous charitable organizations, over multiple years.
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Setting up a DAF with a Community Foundation offers further benefits including:
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- Deep knowledge of the local community and the organizations making an impact;
- Individualized philanthropic support from a local philanthropic advisor;
- The ability to continue making donations to your favorite causes locally, nationally and internationally; and
- Donor privacy/anonymity in the public domain (as desired by you).
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Appreciated Stock Donation Example
Your financial advisor invested $58,000 in 1,000 shares of NVIDIA in January of 2020. In May of 2024, that position is worth $938,000, making it a very large position in your portfolio.
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Your advisor would like to sell 500 shares to rebalance your portfolio to diversify. You would like to be philanthropic and make numerous donations to organizations that are important to you.
Two options for accomplishing this include selling the stock and donating the proceeds or donating this appreciated stock directly to charity.
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 | OPTION 1 | OPTION 2 |
 | Sell stock to rebalance | Donate stock to rebalance |
Capital Gains Tax | $88,000 | $0 |
Charitable Contribution Tax Deduction | $81,440 | $112,560 |
Available to Donate | $381,000 | $451,000 |
Tax Savings | ($3,440) | $112,560 |
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Given this example, we invite you to work with the Community Foundation to make the most of your charitable giving tax benefits.
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