Stock donation in the United States
The benefit of donating stocks to a not for profit organization is the donor will take a fair market value deduction and provide more support to the non-profit. In fact, it is the most efficient way to give charitably, as capital gains tax does not apply and allows you to give more.
The value of the stock is transferred into the not for profit brokerage account.
How does it work
The donor purchase 100 shares of the ABC Company at $ 10 per share or $1,000 ten years ago. Today the shares fair market value is $ 50 per share or $ 5,000.
If the donor transfers the shares to Reaching U, the donor charitable contribution would be $ 5,000.
But if the donor sells the shares and then transfers the cash to Reaching U he would have to pay a capital gain tax on $ 4,000 on the sale of the stock.
The marginal tax rate* on capital gains for federal income tax purposes is either 15% or 20 % plus state and local income, which in NYS and NYC are about 12%.
*The marginal tax rate can be defined as a progressive tax structure where the tax lability increases on an individual with the amount of taxable income earned (Gross income less nontaxable income and allowable deductions).
See example
|
Option 1: John plans to sell his entire position in ABC and donate the net cash proceeds to a non-profit 501( c)(3) or other public Charity. |
Option 2: John´s benefit from gifting his stock directly to a non-profit 501( c)(3) or other public Charity. |
||
| Original Costs of Securities |
$1,000
|
$1,000
|
|
| Current Market Value | $5,000 | $5,000 | |
|
Capital gain
|
$4,000 | $4,000 | |
|
Tax on Capital gain (Assuming 15% federal capital gain tax rate based on John´s income level.) |
$600 | – | |
| Donation Amount After – Tax | $4,400 | $5,000 | $600 = Additional amount available to grant to charities |
*This hypothetical example is only for illustrative purposes.
Please be aware these do not constitute legal or financial advice.
We suggest you to seek professional legal and/or financial advice before deciding upon your donation to ReachingU.
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