Donating Appreciated Stock Can Offer Substantial Tax Benefits

Are you planning to make charitable donations before year end? Do you own appreciated stock that you’d like to sell, but you’re concerned about the tax hit? Then consider donating it to charity rather than making a cash gift.

Appreciated publicly traded stock you’ve held more than one year is long-term capital gains property. If you donate it, you can both avoid the capital gains tax you’d pay if you sold the property and deduct its current fair market value.

Let’s say you donate $10,000 of stock that you paid $4,000 for, your ordinary-income tax rate is 33% and your long-term capital gains rate is 15%. If you sold the stock, you’d pay $900 in tax on the $6,000 gain. If you were also subject to the 3.8% net investment income tax (NIIT), you’d pay another $228 in NIIT. By instead donating the stock to charity, you save $4,428 in federal tax ($1,128 in capital gains tax and NIIT plus $3,300 from the $10,000 income tax deduction). If you donated $10,000 in cash, your federal tax savings would be only $3,300.

If you are charitably inclined or would like to minimize taxes related to your investment portfolio, we can help find the strategies that will best achieve your goals.  Give us a call so we can assist.

Wertz & Company, LLP, is an Irvine Tax Accounting and Professional Services Firm located in Orange County, CA that specializes in working with entrepreneurs along their journey to success.