A Gift of Securities
Stock that has increased in value is one of the most popular assets used for charitable giving. Making a gift of stock to Big Brothers Big Sisters of Central Mass/Metrowest offers you the opportunity to help us and receive many important tax benefits for yourself.
A Gift of Stock – How to Get Started
A stock portfolio is often among the most valuable assets you own and one that can carry substantial capital gain as it appreciates in value. With careful planning, you can reduce or possibly even eliminate federal capital gains tax while supporting Big Brothers Big Sisters of Central Mass/ Metrowest. Read below to see why a donation of stock can offer even more tax benefits than writing a check.
How it Works
- Give stock to BBBSCM/MW
- Receive an income tax deduction
- Securities are sold by BBBSCM/MW and the cash proceeds immediately impact the programs of BBBSCM/MW.
Special Note: A gift of stock must always be given directly to the charity first and never sold by the donor or the donor’s broker. If a donor were to sell the stock him or herself, they will not receive the capital gains income tax deduction.
Did you know?
Stocks are considered to be appreciated (for tax purposes) if they’re worth more now than when you purchased them.
As stock prices increase, so do the taxes you likely owe on the long-term capital gain. But when you donate publicly traded stock (stocks which you’ve owned for one year or more) to a charity such as BBBSCM/MW you will enjoy two major tax benefits:
- You will be exempt from paying capital gains taxes on any increase in value – taxes you would pay if you had otherwise sold the securities.
- You are entitled to a federal income tax deduction based on the current fair market value of the securities, regardless of their original cost.
Important Note: The income tax deduction for long-term capital gain property is limited to 30% of your adjusted gross income in the year you make the gift. However, your amount in excess of 30% of your adjusted gross income is deductible for up to five additional years.
Here’s an Example:
Brian wants to make a donation of $10,000. He can make a gift with cash or stock. He has a marginal federal income tax rate of 28% and is not subject to state or local income tax. The stock value is $10,000 with a cost basis (original purchase price) of $4,000.
Cash Gift vs. Stock Gift
Type of Gift: Cash Stock
Value of Gift: $10,000 $10,000
Cost basis: N/A $4,000
Long-term Capital Gain if sold: N/A $6,000
Long-term capital gain tax eliminated ($6,000 x 15% rate) N/A $900
Income tax savings: ($10,000 x 28% rate) $2,800 $2,800
Total Tax Savings: (capital gain taxes eliminated + income tax savings) $2,800 $3,700
Net Cost of Gift: (value of gift – total tax savings) $7,200 $6,300
In this example, giving a gift of stock instead of cash saves the donor an additional $900. A higher federal tax bracket and any state or local taxes would further improve Brian’s results.
Is this the right time make a gift of stock?
Ask yourself the following questions first:
- Do you have stock that you’ve owned for one year for more and worth more than you originally paid?
- Do you want to avoid paying taxes on their appreciations?
- Can you afford to give up ownership of these securities?
- Would you like to support our mission at this time?
A tax or legal advisor can provide you with additional information. We would be happy to assist you as well. Questions? Contact Harold Pinkham, Director of Advancement, at 508-752-7868 ext: 12