Stocks & Mutual Funds

If you own stock or mutual funds, it may be more tax-wise to contribute these shares than cash. This is because a gift of appreciated stock generally provides you a double tax advantage. First, you may avoid paying capital gains tax on the increase in the value, if you have had the holding for longer than a year. Second, you receive a federal income tax deduction for the full fair market value of the stock or mutual funds at the time of the gift. For example, let's say you bought stock for $10,000 over a year ago and today it is worth $20,000. You plan to donate the entire amount to a charitable organization.

If you sold the $20,000 stock instead of donating it, you would pay capital gains tax on the $10,000 gain in value. The tax rate for long-term capital gains is 15 percent. Therefore, the tax savings for donating rather than selling the stock would be $1,500 (10,000 x 15%).

In addition, you can claim a deduction of the market value of the donated shares -- the full $20,000 -- as a charitable donation deduction. If you are in the 25 percent federal tax bracket, this could generate another $5,000 (20,000 x 25%) in tax savings. This brings your total tax savings to $6,500. If you are in a higher tax bracket, your donation deduction will be even more. Also consider this: you are giving a gift that is two times what it originally cost you.

Please call or email CRLA's Development Team for details on transferring a stock holding. You can email info@crla.org or call (510) 267-0762 x 309.

Please note that this information should not be construed as legal or tax advice.
Please contact your own accountant, attorney, or tax advisor for assistance regarding stock or mutual fund gifts you may be considering making to CRLA.