Gifts of Stock

Make a year-end gift that amplifies your tax benefit!

The end of the calendar year is a great time to consider making a gift to Literacy Together and your favorite nonprofits. When planning to make a relatively substantial contribution to a nonprofit, consider donating appreciated stock from your investment portfolio instead of cash. Your tax benefits from the donation may be larger than a cash donation, and the gift will benefit the organization equally to a gift of cash.

This tax planning tool is derived from the general rule that the deduction for a donation of property to charity is equal to the fair market value of the donated property, or stock in this case. Where the donated property is “gain” property, the donor does not have to recognize the gain on the donated property. Gain is the difference between the cost basis and the fair market value. These rules allow for the “doubling up,” so to speak, of tax benefits: a charitable deduction, plus avoiding capital gain tax on the appreciation in value of the donated property.

Example: Tim and Tina are twins, each of whom attended Yalvard University. Each plans to donate $10,000 to the school. Each also owns $10,000 worth of stock in ABC, Inc. which he or she bought for just $2,000 several years ago.

Tim sells his stock and donates the $10,000 cash. He gets a $10,000 charitable deduction, but must report his $8,000 capital gain on the stock.

Tina donates the stock directly to the school. She gets the same $10,000 charitable deduction and avoids any tax on the capital gain. The school is just as happy to receive the stock, which it can immediately sell for its $10,000 value in any case.

Please note: This plan works for Tina in the above example because the stock has been held for more than a year. If held less than one year, it would be treated as “ordinary income property” for these purposes and the charitable deduction would be limited to the stock’s $2,000 cost.

If you wish to donate stock directly to Literacy Together, please provide your brokerage firm the following details:

Planned Giving: IRA Charitable Rollover

Congress changed IRA laws with the SECURE Act. Before the Act, taxpayers aged 70½ or older had to take a minimum distribution from their IRA. Now the age is 72. An opportunity that remains in place is to direct some or all of these distributions to charity and not pay taxes on the distribution. Contact your IRA administrator to tell them you intend to make a “qualified charitable distribution” to Literacy Together.