Gifting Stocks

Posted on Thursday, July 01, 2021

Making a charitable gift to your favorite organization is a win-win.  Charitable gifts are the lifeblood of most non-profits and the act of making a gift makes us feel good.  It used to be that a charitable donation almost automatically resulted in a tax benefit to the donor.  After all, that’s why these gifts are often referred to as “tax deductible”.  All you have to do is itemize your deductions on your income tax return and the tax benefit is yours.  But starting in 2018, itemizing your deductions became a lot harder to do. 

The good news is that with a little bit of planning, there are still ways to benefit.  One of those ways is using appreciated stock.  Although making contributions by cash, check or credit card is very easy, using appreciated stock for your gifts can supercharge your contribution. 

If you have stock in a brokerage account, the latest bull market may have created some large unrealized gains in your portfolio.  While you could sell the stock and contribute the proceeds to your charity, you would create a taxable capital gain by doing so.  If instead you give the stock directly to the charity, you get a potential double benefit.  If you itemize, you get a charitable deduction for the fair market value of the stock, and whether you itemize or not, you don’t have to pay capital gains tax on the appreciation. 

As with anything, there are rules to follow when making gifts this way.  First, you must have held the stock for over a year to qualify, and the stock must be in a taxable account, not an IRA or qualified account.  The stock must be transferred directly from your account to the charity.  Once the charity receives the stock, they can sell it without having to pay capital gains tax.  Also, before you attempt this, you should check with the charity first to make sure they are able to accept gifts of stock. 

This also works with other assets that would normally generate a long-term capital gain, such as real estate.  However, these are more complicated, and most charities will not want to accept assets that are harder for them to liquidate. Before making any stock gifts to a charity, please consult your DWD Tax Professional. 

Contributed By: Mark Westerhausen, CPA | Director | DWD CPAs & Advisors

Posted in Tax Topics For Individuals

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.