Take Stock in Promoting Stock Gifts This Year!
The other day, I rang the bell outside a hardware store for The Salvation Army Indiana Division. Over a period of several hours, I noticed how people gave to the Red Kettle. The overwhelming majority of the donors gave a $1 bill. Some donors gave other dollar increments, such as $5, $10 and $20. Only one donor asked if we accepted credit cards. I took him inside the store, and he made a $50 credit card gift.
Oddly enough, only about 20 percent of the donors made gifts of coins. With 10 minutes left in my volunteer tenure, a contributor walked up with a large bag of coins. There must have been $40 worth of coins in that bag. This process made me think about the importance of providing donors a variety of options to give to charity, including stock.
According to CNN, many people take advantage of a provision in the tax code that enables benefactors to donate appreciated stock to charity. It is a win-win situation: charitable organizations get a nice contribution (they usually sell shares immediately), while donors can write off the gift and avoid paying capital gains taxes on the stock gains.
The practice of donating stock directly to a charity usually enables donors to give more money to charity than they would if they sold the stocks on their own, paid taxes on the gains and then donated the cash to the organization.
According to Edward Jones, if you gift stocks that have appreciated in value, you can avoid paying the capital gains tax by giving the stock as a gift. If you donate appreciated stocks that you have held for more than a year to a “public” charity, such as a religious or an educational institution, you can typically take a tax deduction for the full fair market value of the stocks, up to 50 percent of your adjusted gross income for that year.
This article from Kiplinger seeks to answer the question: Is it better to give stock or cash to a charity? Do I need to do anything special to give stock? The best strategy depends on whether the stock has increased or decreased in value since you bought it and whether you have owned it for more than a year.
Here are Kiplinger’s five things to know about giving stock to charity to get the maximum tax break.
- Giving appreciated stock you have held for more than a year is better than giving cash.
- If it’s a losing stock, it’s better to sell it and give the cash.
- Ask the charity and brokerage firm about the procedure and time frame for giving stock.
- You can buy extra time with a donor—through an advised fund.
- The timing may be tricky if you donate your required minimum distribution from a retirement account.
According to U.S. News & World Report, gifts of shares to charities should consider effects from the new tax law. Two major provisions of the Tax Cuts and Jobs Act of 2017 will affect generous investors this year and in the foreseeable future. The standard deduction is increasing in 2018 to $12,000 for individuals and $24,000 for married couples, which means donors would need their eligible itemized deductions to total more than that for their charitable donations to reduce their taxable income.
Gordon Fischer Law Firm indicated that the benefits for charitable gifts of appreciated, long-term, publicly traded stock are numerous. Under federal law, the long-term capital gain is excluded from taxable income and the charitable contribution is the fair market value of the stock. Gifts of publicly traded securities do not require an appraisal to document value. If you are interested in gifting stock to a qualified charity as part of your end of year giving, make sure you are doing so in a way that maximizes all your financial benefits.
CNBC’s Inside Wealth noted that Americans gave a record amount to charity in 2017 driven by a soaring stock market, strong economy and charged political environment. For 2018, it is unclear how the new tax law will affect giving. The increase in the standard deduction will make it less attractive for less-wealthy donors to give to charity.
That said, it is imperative that potential donors are given every option to give through any means possible. As the economy continues to surge along with the stock market in 2018, It is hoped that gifts of stock will continue to grow this year. Don’t forget to promote this giving option through your nonprofit organization marketing materials now. Take stock in promoting the concept of giving stock this year!
Duke has extensive experience as a nonprofit practitioner, author, lecturer and consultant. He has been a contributing author to NonProfit PRO for the last 11 years. He has been a long-standing member of the Association of Fundraising Professionals where he was previously named the AFP Indiana Chapter Fundraising Executive of the Year and has held the CFRE designation for many years.
He received his doctorate degree from West Virginia University with an emphasis in education administration, master's degree from Marshall University with an emphasis in public administration and a bachelor's degree from West Virginia University with an emphasis in marketing/management. He has also completed post graduate work at the University of Louisville.
He is currently executive director of development for The Salvation Army Indiana Division in Indianapolis, IN plus Adjunct Professor for Olivet Nazarene University. Contact Duke at firstname.lastname@example.org or 317-224-1029.