Tax Strategies Behind Donating Appreciated Investments 

With the new tax laws and the market doing especially well the past couple of years, donating appreciated investments provides a great way to support a cause close to your hearts with the bonus of some nice tax advantages. A total win-win!

What qualifies as a charitable donation?

Many nonprofits accept gifts of stock/securities. To be eligible for a charitable tax deduction for the fair market value of the stock on the date of the contribution, the stock must be held for over one year.  This strategy also allows a donation of pre-tax funds since no capital gains will be paid on the appreciated value of the donated stock.

Individuals who are 70 ½ or older can make a tax-free qualified charitable distribution (QCD). You may give up to $100,000 per year from your IRA, but the money needs to be transferred directly from the IRA to the charity in order to be tax-free. If you withdraw it from the IRA first and then give it to the charity, you can deduct the gift as a charitable contribution (if you itemize), but the withdrawal will be included in your adjusted gross income.

The process of donating appreciated investments

Many IRA administrators make the process simple with online forms to easily transfer the money. You may also have the option of signing up for check-writing privileges from your IRA so that you can write the check directly from your account to the charity. That way, the charity will see who the contribution is from, and you can include specific directions as to which fund within the charity you’d like to support.

Otherwise, the IRA administrator will cut a check and send it directly to the charity, but the charity won’t necessarily be given clear information about whose account it is from or what the money is meant to support. If your IRA administrator doesn’t offer check writing and instead transfers the money directly to the charity, we recommend calling the charity in advance and giving them a heads up that it will be getting a check from your IRA.

Do you want to donate?

If you are interested in donating appreciated investments, we recommend reaching out to your tax advisor for personalized advice based on your individual circumstances. Contact us with any further questions or if you want to start a donation today.