When we meet with our clients to map out their financial plan many often express interest in setting up a charitable gifting plan to their church or other charities that are important to them.
The majority of clients we see give cash donations, tangible items, or volunteer their time and service. In many cases giving in these forms makes sense, but there is another way to gift to these charities in a way that provides a benefit to the individual and the receiving charity.
Gifting stock
Gifting appreciated stock can often be utilized to create a “win-win” scenario for the giftor and the receiving charity. Gifting appreciated stocks or mutual funds from a taxable brokerage account can save you from paying taxes on the realized gains from your holdings.
Whenever you sell stock in your taxable brokerage account you must realize the gains and report them on your tax return. However if you gift the appreciated stock to a charity you will avoid paying any tax on the realized gains. The charity is also able to avoid paying tax on the gains which makes this an attractive transaction for both parties. For example:
| FMV of stock | Basis | Realized Gain | Gain Reported on Tax Return | Final Gift | |
| Sell stock and donate the cash proceeds | $15,000 | $5,000 | $10,000 | $10,000 | $13,500* |
| Gift stock/mutual fund directly | $15,000 | $5,000 | $10,000 | $0 | $15,000 |
*Assumed 15% LTCG rate Federal tax bracket when reporting the $10,000 of gains therefore ($10,000x.15) =$1,500 federal tax due.
The above scenario also assumes long term capital gains (LTCG) which would be the case for stock that has been held for more than one year. It is a good idea to consult with a CERTIFIED FINANCIAL PLANNER™ professional before making stock gifts, as they can help you determine the most beneficial stock holding to gift.
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