Making a Charitable Contribution

Why sell shares when you can gift them as a charitable contribution? If you have appreciated stocks in your portfolio, you might want to consider donating those shares to charity rather than selling them.

Donating appreciated securities to a tax-qualified charity may allow you to manage your taxes and benefit the charity. If you have held the stock for more than a year, you may be able to deduct from your taxable income the fair market value of the stock in the year that you donate. Furthermore, you avoid realizing gains which would likely increase your taxable income and tax bill. If the charity is tax-exempt, it may not face capital gains tax on the stock if it sells it in the future.¹

If you sell shares of appreciated stock from a taxable account and subsequently donate the proceeds from the sale to charity, you may face capital gains tax on any gain you realize, which effectively trims the benefit of cash donation.¹

When is donating cash a choice to consider? If you provide the charity with a cash gift, there may be some limitations. Cash gifts are generally deductible up to 50% of adjusted gross income. As an example, if a donor in the top 37% federal tax bracket gives a 501(c)(3) non-profit organization a gift of $5,000, the net may be $3,150 with $1,850 realized in tax savings. A donor should also consider state taxes in addition to federal.²

If you donate shares of depreciated stock from a taxable account to a charity, you can only deduct their current value, not the value they had when you originally bought them.¹

Remember the tax rules for charitable donations. If you donate appreciated stock to a charity, you may want to review IRS Publication 526, Charitable Contributions. Double-check to see that the charity has non-profit status under federal tax law, and be sure to record the deduction on a Schedule A that you attach to your 1040.³

If your contribution totals $250 or more, the donation must be recorded – that is, the charity needs to give you a written statement describing the donation and its value and whether it is providing you with goods or services in exchange for it.⁴

If your total deduction for all non-cash contributions in a tax year exceeds $500, then complete and attach Form 8283 (Noncash Charitable Contributions) to your 1040 when filing. If you donate more than $5,000 of property to a charity, you will need to provide a letter from a qualified appraiser to the charity (and by extension, the IRS) stating the monetary value of the gift(s).⁴

Gifting cash or other assets to an organization is a wonderful opportunity. But keep in mind that tax rules are constantly being adjusted, and there’s a possibility that the current rules may change. Make certain to consult your tax and legal professionals before starting a new gifting strategy.

To learn more about CapSouth Wealth Management and the services we provide, contact us at 800.929.1001 or www.capsouthwm.com/contact or visit our website at www.CapSouthWM.com

1. Forbes.com, December 1, 2020
   2. IRS.gov, December 7, 2020
   3. IRS.gov, February 18, 2021
   4. IRS.gov, March 12, 2021

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with CapSouth Wealth Management. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite.

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent registered Investment Advisory firm.  CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.