The concept is simple enough: When you want to give money, don’t just write a check. Instead, look through your portfolio and find appreciated marketable securities such as stocks, bonds, mutual funds, real estate investment trusts, or anything else the law permits. According to the Fidelity Charitable Gift Fund, “Any security with a long-term unrealized gain (meaning it was purchased over a year ago and has a current value greater than its original cost) may be donated to a public charity and a tax deduction taken for the full market value of the security, up to 30 percent of the donor’s adjusted gross income. Because the security is being donated, instead of sold, capital gains taxes are generally avoided.” The result is that the donor can give more money to the charity or cause of their choice with less going to Uncle Sam in the form of taxes if they had sold the stock, taken the net proceeds, paid the capital gains tax, and donated the cash. In the case of people making a lot of money, or who hold substantially appreciated investments, the difference can be huge.
The next time you are thinking about giving to a church, charity, college, or any other worthy cause that you think is important and want to support, call and ask if they accept appreciated securities.
