Can I donate stock to charity?

By Jared Coulson AAA
A:

Giving stock, instead of cash, as a donation can greatly benefit both parties. You will find that most charities, hospitals, schools and other nonprofit organizations will accept stock as a gift or donation.

If the stock has increased in value from the time of purchase, the owner can avoid paying the capital gains tax by donating the security to another party. When the security is being donated to a charitable organization, the total amount will still be eligible for a tax deduction. Since taxation is avoided on the stock donation, the giver will be able to make a larger donation.

For example, let's say you were looking to make a $1,000 donation to a charity. You could either give cash or donate stock. Let's assume that the you bought stock for a original purchase price of $700, but it is now worth $1,128.55. To make it simple, let's assume capital gains tax is 30% of the stock's appreciation. Selling the shares for cash would net about $1,000 after capital gains tax (1,128.55 - (1,128.55 - 700)*0.30). In this case, you should be indifferent between donating the entire stock or giving cash, as both choices will cost you $1,000. However, the charity can receive more benefit from a stock donation, as they will receive a gift valued at $1,128.55, instead of the $1,000 in cash.

For additional information on how to give stock as a gift, read Can I give stock as a gift?

RELATED FAQS

  1. What are the advantages to structuring a business as a master limited partnership ...

    Learn about master limited partnerships (MLPs) and their unique tax treatment, which may make them beneficial for certain ...
  2. What does U.S. law say about contingent beneficiaries?

    Learn about regulations the United States has on the naming of contingent beneficiaries, the types of contingencies that ...
  3. How do I change my contingent beneficiary?

    Learn what life insurance companies and retirement plan accounts require from you to change your contingent beneficiary designations.
  4. What kinds of assets can be included in a revocable trust?

    Understand what types of assets can be included in a revocable trust, and why some asset types are excluded from this estate ...
RELATED TERMS
  1. Contingent Beneficiary

    1. A beneficiary specified by an insurance contract holder who ...
  2. Guideline Premium And Corridor Test (GPT)

    A test used to determine whether an insurance product can be ...
  3. Cash Value Accumulation Test (CVAT)

    A test method used to determine whether a financial product can ...
  4. Capital Growth

    The increase in value of an asset or investment over time. It ...
  5. Variable Annuitization

    An annuity option in which the amount of income payments received ...
  6. Proof of Charitable Contributions

    Substantiation required by the Internal Revenue Service for a ...

You May Also Like

Related Articles
  1. Bonds & Fixed Income

    A Look at the Pros and Cons of Muni ...

  2. Options & Futures

    Options and Roth IRAs: Do's and Don'ts

  3. Professionals

    Vanguard Readies Muni Bond ETF

  4. Mutual Funds & ETFs

    4 Tax-Free Muni Bond ETFs to Consider

  5. Investing Basics

    Know Your Stock Cost Basis

Trading Center