As the end of the year approaches, many of us turn our minds to charitable giving. While cash donations are always appreciated, consider a more impactful option: donating highly appreciated securities. This strategy offers significant benefits for both you and the worthy causes you support.

Here’s why donating appreciated securities is a smart move for your 2023 charitable giving:

Maximize Your Donation:

  • Capital gains tax: When you donate appreciated securities held for more than a year to a qualified 501(c)3 organization, you avoid paying capital gains tax on the increase in value. This means more of your donation goes directly to supporting the causes you care about.
  • Claim a charitable deduction: You can also claim a tax deduction for the full fair market value of the securities you donate. This deduction can potentially offset your taxable income, further reducing your tax burden and increasing the overall value of your gift.

In 2023, the standard deduction for individuals is $13,850 ($27,700 for married couples filing jointly). If you itemize deductions, you man claim the full fair market value of your appreciated securities up to 60% of your adjusted gross income (AGI). For any excess, you man carry it over for up to five years.

For example, imagine you own shares of a stock that have appreciated in value from $10,000 to $50,000. If you donate these shares to charity, you avoid paying capital gains taxes on the $40,000 gain. Additionally, you can claim a $50,000 deduction on your tax return.

Flexibility and Efficiency:

  • Donate directly to charities: Many charities now accept donations of stock electronically, making the process simple and convenient.
  • Utilize a donor-advised fund: Consider donating your securities to a donor-advised fund (DAF). This allows you to receive the tax benefits immediately while taking time to decide which charities to support in the future. DAFs offer flexibility and control over your charitable giving.

Additional Benefits:

  • Reduce your portfolio risk: Donating appreciated securities can help diversify your portfolio and reduce your overall tax burden.
  • Leave a legacy: By donating highly appreciated securities, you can make a significant and lasting impact on the causes you care about, even after your lifetime.

Who should consider this strategy?

Donating appreciated securities is a smart option for anyone who:

  • Owns stocks, bonds, or other securities that have appreciated in value.
  • Is looking to reduce their tax burden.
  • Wants to maximize the impact of their charitable giving.

Remember: It’s crucial to consult with your tax and financial advisor before making any significant investment or charitable decisions. They can help you determine if donating appreciated securities is the right strategy for your individual financial situation and goals.

By taking advantage of this tax-smart approach, you can double your impact and make a lasting difference for the causes you care about. So, consider giving the gift of appreciated securities this year. It’s a win-win for you, the charities you support, and the world around you.