Giving Shares to Charity

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Merry Christmas and Happy Holidays!!!

 

For those reading this today, Christmas is two days away.  I can’t wait!  My parents throw a huge Christmas Eve party every year with friends and family.  My mom makes an Italian feast for Christmas Eve each year, but my favorite part is her famous chocolate chip cookies.  I can’t ever get enough of them.  It’s fun to see everyone dressed up as we catch up with friends and family that we haven’t seen in too long.

 

Christmas Presents

I also get really excited to open up presents.  I feel like a little kid every Christmas.  As I’ve gotten older though, giving gifts has topped my list of favorite things about the holiday.

 

This year I was able to find an awesome deal on a Yamaha keyboard piano for my wife.  My wife loves to play at her dad’s house, and my son, who just turned one, loves to dance while my wife plays.  So I’m hoping this will be a memorable Christmas of music and dancing.  

 

Reflection over the Holiday

During this season, I tend to reflect on all the wonderful blessings around me and all that I have to be thankful for.  I am grateful to celebrate another year of marriage to my beautiful wife, to have watched my son grow and develop tremendously, for my faith, and finally, for good health.

 

Giving Back

Those four things are among many, many things I am thankful for.  With that said, especially during this time of year, we try to give back and be as generous as we can.  It looks like we are not the only ones.  According to Guidestar, the majority of nonprofit giving is received during the October and December.

 

This article, however, is not meant to compel you to give.  I think it’s way too easy to stand up on a soapbox and tell people what they should and shouldn’t do.  When honestly, giving is totally up to you and your convictions.

 

Giving Shares of Stock

This article will address if you plan to give, how to potentially optimize your giving and get the biggest bang for your buck.  Did you know that a lot of charities will accept shares of stock?  

 

I certainly didn’t until my brother-in-law shared this information with me.  He wanted to contribute to our local ministry here at church, but he didn’t have the cash available at the time.  However, he did have some shares of stock that had appreciated greatly over the years, so he thought about selling the shares and then donating the money to charity.  

 

However, before he did that, he found out that if you donate stock that has increased in value since the time that you bought it, you can take a charitable deduction for the stock’s fair market value on the day you give it away.

 

Example #1

For those not following, let’s say that you bought 10 shares of stock for $100 each.  For tax purposes that means that your tax basis in the stock is $1,000.  Now let’s say that you hold the stock for more than a year, and the stock doubles, so each share is now worth $200.  The fair market value of the shares are now $2,000.  

 

If you have held the shares for over a year, you will avoid the capital gains tax and will be able to deduct the fair market value on your itemized deduction.  However, if you have only held the investment for less than a year, you are limited to deduct what you paid for the stock.

 

So clearly, it is tax advantageous in this scenario to hold the shares of stock for a year in order to maximize your deduction.

 

Example #2

Now let’s say that the opposite happens.  That your investment goes from $1,000 down to $500.  In this scenario, it makes more sense to sell the investment and then give the cash proceeds.  This way you will be able to take a capital loss on your taxes and be able to take the charitable deduction on your itemized deduction.  Please note: if your capital loss exceeds your capital gains for the year that the maximum deduction that you can take is $3,000.  Any additional losses would be rolled into the following year.

 

One thing to be aware of is not every nonprofit is familiar with the process of receiving shares of stock instead of cash.  So you may need to educate the charity about the process.  

 

In order to complete the process you will need to contact your brokerage firm to have them walk you through the procedural steps.  Normally, you will be required to fill out a transfer form and then you will need to notify the charity that the shares of stock are on the way.  Be as detailed as possible by letting the nonprofit know the name of the stock, the number of shares, and the date you are expecting the shares to arrive in their account and most importantly, making sure they recognize the shares came from you.

 

So readers, have you ever given shares of stock to a charity?  Did you run into any difficulties?  Share your stories below.

Mustard Seed Money

Welcome to the website. A mustard seed is a very small seed but astonishingly grows very large over time. My hope is that through your financial journey that your small investment in time, money and faith will grow beyond anything that you could ever imagine.

24 Comments

  1. Interesting. I’ve never really looked into giving shares to charity so thanks for defining the rules. There are many ways out there to maximize charitable giving from investment accounts: donor advised funds, outright shares, and charitable trusts. Which one to use when is largely a mystery to me to be honest.
    Full Time Finance recently posted…Meeting and Adjusting MilestonesMy Profile

    • I have to admit that just when I get a handle on finances I found out something new.

      I definitely need to read up more on donor advised funds, charitable trusts, etc. in this upcoming year.

      I need to see what makes most sense.

      Thanks for stopping by and sharing!!!

  2. I’ve never donated shares to a charity, but I’m familiar with the process. Currently, all of my stock holdings are in tax-deferred accounts and with any extra after-tax funds we may have sloshing around I’ve paid down our mortgage.

    This is a good tip for folks though, thanks for sharing!
    Jon @ Be Net Worthy recently posted…Making A List And Checking It Twice…My Profile

    • Thanks for stopping by Jon!!!

      That’s awesome that all your stock holdings are in tax-deferred accounts and any leftover money is going towards your mortgage.

      I paid off my mortgage four years ago in December and it was the best Christmas present I could ever give myself.

      Thanks for sharing!!!

  3. Hm, this is a good option to know about. A few people have been talking about DAFs so it’s good to absorb all of this different info. It doesn’t make sense for us to donate to charity heavily yet since we’re still eliminating debt. But I’d love to make it a regular part of our lives once we do retire early!

    • Thanks for stopping by and sharing Mrs. Picky Pincher!!!

      This is definitely the season for DAFs, as I too have read about a bunch of them recently.

      I’m glad that the article was helpful and hopefully you’ll be able to eliminate debt soon 🙂

  4. Thanks for the informative post. I haven’t donated to charity yet, but it’s nice to know that there are options other than just giving cash. I already knew a little bit about gifting stocks to charities and wrote about it in my “Trump vs Buffett” post. I think that post got my first comment from you, so thanks for that!! Merry Christmas and Happy Holidays! And enjoy the chocolate chip cookies! They sound delicious.

    • Thanks for stopping by and sharing!!! I had no idea I was the first to comment on your page. I still remember that article it was excellent!!!

      Merry Christmas and I will definitely be enjoying those chocolate chip cookies 🙂

  5. I’ve never heard of this. I guess I still like to keep it ‘old school’ and donate directly. I like to actually be more involved with my donations. Today, we are going to donate to a local non-profit café that feeds the poor, but we are also going to sit and have a conversation with some people. Money may buy food, but it doesn’t buy love, so we have to do that in person. 🙂
    Primal Prosperity recently posted…Do You Have Dreams, or Do Your Dreams Have You?My Profile

    • Thanks for sharing Primal Prosperity!!!

      I definitely understand the old school way of donating. I definitely did it that way for years.

      I love that you not only buy food but also connect with those less fortunate and share your love 🙂

      Thanks for sharing!!!

  6. Merry Christmas! Fascinating post as I have never heard of donating stock to charities. On a side note, I do enjoy hearing of people donating gold coins to the Salvation Army. Our local one gets a couple each year randomly during this season. Really cool. It is nice to hear of such good deeds.
    Mr Defined Sight recently posted…Merry Christmas!My Profile

    • Merry Christmas!!!

      Thanks for stopping by Mr. Defined Sight!!!

      That is incredibly heart warming to hear that people will anonymously give gold coins. That must be quite the surprise when they are tallying up the money given.

      Thanks for sharing!!!

  7. “This year I was able to find an awesome deal on a Yamaha keyboard piano for my wife.”

    I hope your wife doesn’t read this blog or you just gave your surprise away! 😛

    I had no idea you could donate stocks to charity, that’s really useful to know. My wife loves donating to animal welfare charities so perhaps this is something we could be doing more efficiently in the future. Definitely worth looking into!
    Andrew Knapman recently posted…My First BudgetMy Profile

    • Thanks for stopping by and sharing Andrew!!!

      My wife has never brought up any comments that she’s read. Although she may sneakily read and know 🙂

      I’m glad that you found the article helpful!!! I hope it’s an efficient strategy for you in the future.

  8. I do a version of this, donating appreciated shares of mutual funds to the our Donor Advised Funds (with Vanguard Charitable & Fidelity Charitable). From there, we can easily distribute the money to any charitable organization. There are more than a million to choose from.

    It’s nice to have the DAF as an intermediary, as not all charities are set up to accept appreciated equities, but all can take a check from your DAF. My CommentLuv post is a giving tutorial, and I have several other posts on the topic.

    Merry Christmas to you & yours, MSM!
    -PoF
    Physician on FIRE recently posted…DAF Giving Tutorial from Fidelity and Vanguard CharitableMy Profile

    • Thanks for stopping by and sharing POF!!! I will definitely check out the article as I am constantly trying to learn more about DAF’s as I was not as familiar with the process until recently.

      Thanks for stopping by and sharing!!!!

  9. Great idea MSM. After reading this post, I instantly Googled to see if there is an equivalent rule for Canadians. What do you know? There is a similar rule in the Canadian tax law. Sweet. One more deduction rule in my back pocket when it comes to tax time. As for the donation, I only do cash donations and I volunteer at a local charity to raised funds to therapy for kids with Autism. A win for me and a with for the charity. I’ll definitely pass the message to the board members of my charity.
    Leo T. Ly @ isaved5k.com recently posted…Freedom 48 Investment Toolkit: Foreign Market Investment BasicsMy Profile

    • Leo you are the king of knowing deduction rules and implementing them!!!

      That’s awesome that you donate your time and money with children with Autism. I know that they appreciate it.

      Thanks for sharing!!!

  10. Great post! Donating shares can definitely be a win-win! Often churches or other charities will also accept property donations. You can either donate your home immediately, or leave it in your will. Again, this can be a win-win, giving you a tax break, while giving the church a valuable asset. I’ve heard that in some cases, the organization will even allow you to continue to live in the house until you die or move out.
    Daniel Palmer recently posted…I’m Sacrificing My Privacy for $104/yearMy Profile

    • Thanks for sharing Daniel. I can’t say I’m familiar with donating property like a home but I am definitely going to look into it.

      It makes sense since you can donate clothes, cars, etc. So why not houses. Thanks for sharing!!!

    • I’m glad that you enjoyed the article Andrew!!! I’ve always thought that it was a “wealthy” type activity but clearly it has it’s advantages across the board 🙂

      Thanks for stopping by!!!

  11. This is a great idea. Just make sure the transfer takes place before the end of the year, if you need the tax deduction for the current year. Usually the charity will have all the forms and details about what you need to do the transfer.

    • Thanks for stopping by Fred!!! You are absolutely correct that you need to get the transfer in place before the end of the year if you want that tax deduction 🙂 and may need to educate the charity if they are not familiar with the process.

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