Gifts of Stock: Getting Started
A stock portfolio is often among the most valuable assets you own— any one that can carry substantial capital gain, or appreciation in value. With careful planning, you can reduce or even eliminate federal capital gains tax while supporting our work. Read on to see why donating stock can offer even more tax benefits than writing a check.
1. You give securities
2. You receive an income tax deduction
3. Securities are sold and Alliance for the Arts receives the cash proceeds
How It Works
As stock prices increase, so do the taxes you owe on the long-term capital gain, which are generally charged at a rate of 15 percent (0 percent if you are in the 10 or 15 percent tax brackets) through 2010. But when you donate publicly traded stock you’ve owned for more than one year to a qualified charitable organization such as the Alliance for the Arts, you enjoy two major tax benefits:
- You will be exempt from playing capital gains taxes on any increase in value-taxes you would pay if you had otherwise sold the securities.
- You are entitled to a federal income tax deduction based on the current fair market value of the securities, regardless of their original cost.
The income tax deduction for long-term capital gain property is limited to 30 percent of your adjusted gross income in the year you make the gift, but your excess deduction is deductible for up to five additional years.
Learn more about the tax benefits of donating appreciated property.
ExampleLucy wants to make a charitable gift of $10,000. She can make her gift with either cash or stock. She has a marginal federal income tax rate of 28 percent and is not subject to state or local income taxes. The stock’s value is $10,000, with a cost basis of $4,000.
Cash Gift vs. Stock Gift
| Type of Gift | Cash | Stock |
|---|---|---|
| Value of gift | $10,000 | $10,000 |
| Cost basis | N/A | $4,000 |
| Long-term capital gain if sold | N/A | $6,000 |
| Long-term capital gains tax ($6,000 x 15% rate) | N/A | $900 |
| Income tax savings ($10,000 x 28% rate) | $2,800 | $2,800 |
| Total tax savings (capital gains tax eliminated + income tax savings) | $2,800 | $3,700 |
| Net cost of gift (value of gift minus total savings) | $7,200 | $3,700 |
In this example, using the stock instead of writing a check saves an added $900. A higher federal tax bracket and any state or local income taxes would further improve Lucy’s results.
Learn More
A tax or legal advisor can provide you with additional information. We would be happy to assist you as well. Simply contact Patricia Jones at (805) 449-2590; we can work with you to find a way to give that meets your goals.
Click on the Links Below for Additional Information:
- Is this gift right for you?
- Case Study
- How to Complete Your Gift
- Action Items: We hope our website has answered many of your questions about giving stock to the Alliance for the Arts. Here are some actions to take to learn more about this way to support our mission.
- Learn more about the tax benefits of donating appreciated property.
- Contact us at (805) 449-2590 with any questions you have.
The information in this website is not intended as legal advice. For legal advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to income tax apply to federal taxes only. Federal estate tax, state income/estate taxes or state law may impact your results.