Thanks for reading the 25 Days of Giving series. We’re “unwrapping” posts on various aspects of charitable giving each day through Christmas.
A less-than-obvious, but ideal asset for charitable donations is appreciated, long-term, publicly traded stock. Before we list the benefits, let’s break down the terms.
Appreciated simply means increased in value.
Long-term means stock held for more than one year; stock held for 366 days. A long-term capital asset is generally taxed at a lower rate.
Publicly traded stock just means a publicly held company whose ownership is dispersed among the general public in many shares of stock which are freely traded on a stock exchange or in over the counter markets.
The benefits of charitable gifts of appreciated, long-term, publicly traded stock are numerous.
Under federal tax law, charitable gifts of appreciated, long-term stock have a double benefit: (1) the long-term capital gain is excluded from taxable income, and (2) the charitable contribution deduction is the fair market value of the stock. Click to this other blog post I wrote to see a case study example comparing a donation of straight cash versus a donation of appreciated stock.
Iowa law also provides a third benefit for making a charitable gift of stock; donors can receive a state tax credit of 25% of the gift under the Endow Iowa Tax Credit Program. Interested? Explore the details of Endow Iowa here.
As if that wasn’t enough to convince you there’s yet another benefit. The substantiation rules for gifts of donated securities are more relaxed than for gifts of other type of donated property. Gifts of publicly traded securities do not require an appraisal to document value. This is important, as non-cash gifts of more than $5,000 generally require a qualified appraisal by a qualified appraiser. This requirement can be quite complicated, so you’re welcome to read more on it here. (In case you were wondering, the value of gifts of publicly traded securities are based on a simple calculation: the arithmetic mean of the highest and lowest selling prices on the date of the gift.)
If you’re interested in gifting stock to a qualified charity as a part of your end of year giving, make sure you’re doing so in a way that maximizes all of your financial benefits. Or, if you’re a nonprofit leader wanting to accept gifts of stocks, don’t hesitate to reach out via email or phone (515-371-6077) if you would like to discuss further.