For Brock Nelson, it’s all about increasing his ability to donate to a cause he is passionate about
After developing a spontaneous mutation of polycystic kidney disease (PKD) five years ago, Brock is currently a PKD Foundation Board of Trustees member and donor. Among the many reasons he chooses to support the organization, Brock says, “The Foundation is critical for helping to develop research to better understand the disease and potential treatments for the disease, to fund fellowships to encourage more people to get involved with PKD research and to educate patients about the disease.”
One method of support Brock chooses year after year is donating his appreciated securities – investments that have increased in value from the time they were purchased. Stocks and mutual funds are examples of appreciated securities and Brock’s preferred form of charitable donation.
“By taking advantage of the double tax benefits that come with stock giving, I am able to increase the amount I give to the Foundation,” Brock says.
That’s right, there is more than one attractive federal tax benefit that comes along with donating stock, and you get more bang for your buck when you choose this route. To get this straight, let’s look at an example:
Let’s assume you originally bought stock for $10,000 and now it’s worth $50,000, which means you have a capital gain of $40,000. If you decide to sell your stock and cash in on the securities, you will have to pay a capital gains tax on that increased value ($40,000). Say your combined capital gains rate is 25 percent – you would owe $10,000 in taxes. You’re left with $40,000 to donate out of your own pocket.
However, if you choose to directly donate your appreciated stock, the $50,000 will be transferred to the PKD Foundation, you won’t pay a single penny of capital gains tax and you’ll receive a charitable tax deduction for the full $50,000, just the same as if you made a cash donation.
So, donate that stock like Brock does and you will:
- Avoid the capital gains tax
- Enjoy a charitable income tax deduction for the market value of the gift
- Provide additional support to the PKD Foundation
For those considering making a gift from appreciated securities instead of income, Brock says, “Stock giving is a very effective and easy way to donate to the Foundation. It takes only slightly more effort than writing a check, but allows you to donate more to the Foundation than you otherwise would be able to if you were to donate cash.”
Brock includes that making a stock gift to the Foundation is as easy as filling out a one-page form and handing it to your stock broker. Keep in mind, though, that you must hold the stock for at least one year to qualify.
Favorable tax laws allow the full-market value to be considered as a tax-deductible contribution (versus cost) of a stock or appreciated security (held for more than one year) when gifted to a public charity, like the PKD Foundation. You may also avoid capital gains tax on these appreciated securities (held for more than one year) when you gift them to a charitable organization.
Read more about gifts of stock in our Estate Planning Guide. To receive your free copy, email Jackie Hancock Jr., CFRE at email@example.com.