Donating to charity can be a wonderful and awarding experience. People invested in a cause or organization might be interested in ways to further their donation. Some charities and organizations will accept stock as a gift. There are a few benefits to doing this for everyone involved.
What are the tax benefits of donating stock?
Stockowners can avoid paying capital gains tax by donating stock to a qualifying charitable donation. As long as this security has gone up in value and you’ve donated that security to charity, its fair market value can be itemized as an income tax deduction.
These tax savings can then be turned into a larger donation down the line if you desire – a huge bonus for the organization you’re donating to. There are a few different things that donors should keep in mind though, such as the different IRS requirements based on whether you donated private company stock or publicly traded stock.
There are also some limits to tax deductions for donated stock. Donations to some qualified charitable organizations will only accept appreciated stock that is 30 percent of adjusted gross income (AGI) and 50 percent if that stock was subject to short-term capital gains or ordinary income tax.
Benefits of donating stock for the nonprofit
Donating stock is a good way to make a larger contribution all at once, without dipping into your checking account. And if you would’ve sold the stock and then donated that amount, it would have been subject to taxes before donation.
It’s also easier to donate stock depending on if you utilize a donor-advised fund or not. These funds can make it easy to donate to multiple charities at once and figure out taxes as well.
It can be difficult to know the best way to donate to your favorite charities. With the help of a financial advisor or other trusted professional, the process can be made easier.