Charitable donors like Mark Zuckerberg, CEO of Facebook, are always looking for ways to make their dollars go farther and make more of a difference to the causes they care about. Mr. Zuckerberg recently announced that he would be donating 99% of his shares of Facebook. Donating long-term appreciated securities directly to charities or charitable trusts — rather than selling the assets and then donating the cash proceeds — is one of the best and easiest ways for donors to give more. By taking advantage of the applicable tax incentives, donors can significantly increase the amount of funds available to them for charitable giving.
Most Americans are making much smaller donations than Mr. Zuckerberg, but the relative impact to the donor can be similar. For example, are you considering making year-end gifts or paying annual dues to a non-profit organization in time for the 2015 tax deduction? You should consider making your donation with long-term, highly appreciated assets like stocks, bonds or mutual funds vs. writing a check.
A charitable contribution of long-term appreciated securities that have realized significant appreciation over time — is one of the most tax-efficient of all ways to give. This method of giving has become increasingly popular in recent years.
The two key advantages are:
First, any long-term appreciated securities with unrealized gains (meaning they were purchased over a year ago, and have a current value greater than their original cost) may be donated to a public charity and a tax deduction taken for the full fair market value of the securities — up to 30% of the donor's adjusted gross income according to the IRS website.
Second, since the securities are donated rather than sold, capital gains taxes from selling the securities no longer apply. The more appreciation the securities have, the greater the tax savings will be. When you look at it closely, you are getting a tax deduction in the current year, with dollars that would out as capital gains taxes.1
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