You’ve had a great year. You’re killing it at work, business is good, your stock portfolio is up and you want to share the wealth and make a generous contribution to your favorite charity.
So, what do you do?
You call up your broker, tell them to sell 10 thousand dollars worth of shares, donate the cash and then look forward to claiming the itemized deduction on your tax return, right?
Remember, when you sell stock at a profit, you could be on the hook for capital gains taxes, even if you turn around and donate all the money to charity.
For an Oregon resident, you could be looking at paying the IRS 15-20% of your long-term gains, and then another 8 or 9% to the state. Probably not what you had in mind when you were thinking about being charitable.
So what should you do?
Don’t sell appreciated stock to donate cash. Instead, donate those shares of stock directly to the charity.
You’ll get to claim the market value of your stock on the date of your donation as the amount of your itemized deduction, and you’ll avoid recognizing income and paying capital gains taxes.
But what if your stocks are down, instead of up?
In that case, the tax-smart move would be to sell those stocks to recognize the capital loss, and then donate the cash to charity.
If you’re working with a financial advisor, talk with them before making major changes to your portfolio.
As you’re planning your year-end giving, don’t forget to take into account the charitable contribution limits that the IRS has in place, and make sure that you keep good records so your CPA can make sure you get the tax deduction you deserve.
If you need help calculating the tax implications of your charitable giving options, a basic tax-planning session good be a good way to find out how to do the most good with what you have to give.
My fee for basic tax planning starts at just $195, but I only have a limited number of appointments available before the end of the year.
If you’re interested, click here to see my calendar online and book the appointment time that works best for you.