While the higher standard deduction might mean fewer itemizers this year, the new tax law left some of the biggest tax advantages for charitable donations untouched. Case in point: appreciated stock. As we dive in for a deeper look at this tax-wise giving strategy, there are two determining factors that should be considered: First, how long has the security been held? Second, has the value increased or decreased?
Here are four things to know about gifting stocks to achieve a maximum charitable tax deduction this year:
In most cases, gifting appreciated stock held for more than a year provides a greater benefit than gifting cash in the same amount.
By gifting stock, capital gains are avoided, and the donor receives a charitable deduction for the full market value of the security regardless of the cost basis. Gifts of appreciated stock are limited to a 30 percent deduction of the client’s adjusted gross income (AGI). However, any unused deduction can be carried forward up to five years.
If the stock has decreased in value, sell the stock and gift the proceeds.
The donor can take a loss and a charitable deduction based on the cash gift. When gifting cash, the deduction limit is raised to 60 percent of the AGI.
Keep in mind that timelines can be a factor.
The required paperwork for a gift of stock might take up to a week (or longer) to process while the paperwork for mutual funds normally takes longer. The Oklahoma City Community Foundation has accounts at most of the local and national brokerage firms, making it easy to facilitate a transfer of securities. The client simply provides their financial advisor with our account number and the transaction is completed in 24 to 48 hours. We then issue a gift acknowledgement for the closing average price to the donor within 10 days.
Gifting appreciated stock directly to a donor advised fund is an easy transaction.
A donor can transfer the securities to a donor advised fund and then decide how and when to make grants to one or more charity(s).