Planning Your Gift by Comparing the Benefits

The concepts of giving stock or other appreciated securities are best illustrated by the following interactive example that compares the income tax benefits of donating cash to the increased benefits of giving stock or other appreciated securities.

You can personalize the example with your own name, gift amount and tax rates to plan your own gift. You can also share your plan with others, such as your professional advisor, in complete privacy by clicking on the Share link.

       

Interactive Example

Jordan would like to make a $10,000 gift to the USS Midway Museum. Jordan is in a combined federal and state ordinary income tax bracket of 35%, and a combined federal and state long-term capital gains tax bracket of 15%.

If Jordan donates cash, Jordan will receive a $10,000 charitable income tax deduction and save $3,500 in taxes.

If Jordan funds the gift with $10,000 of stock (or other securities) that were purchased at least one year ago for $2,000, the following would result:

  • Jordan will receive a charitable income tax deduction for $10,000, saving $3,500 in taxes (just as in the case of a cash gift), plus
  • Jordan will avoid realizing a capital gain of $8,000, and forever eliminate a potential $1,200 (15% capital gain tax rate X $8,000) in capital gains tax that would have been paid of the securities had been sold rather than donated).

By giving stock instead of cash, the cost of Jordan's gift in this case has been reduced to $5,300. This represents a combined tax savings of $4,700

  Gift of Cash Equal Gift of Stock
Charitable Gift $10,000 $10,000
Cost Basis n/a $2,000
Potential Capital Gains n/a $8,000
Capital Gains Tax Avoided $0 $1,200
Combined Income and Capital Gains Tax Savings $3,500 $4,700
After-Tax Cost of Gift $6,500 $5,300

How Much More Can Jordan Give?

Since it costs less to donate appreciated securities, how much more can Jordan give for the same after-tax cost as cash?

If Jordan donates $12,264 of appreciated stock (or other securities) with a cost basis of $2,453, Jordan’s income taxes can be reduced by $4,292 and potential capital gain taxes of $1,472 will be eliminated.

The net cost of this gift is $6,500 ($12,264 - $4,292 - $1,472), the same as for a cash gift of $10,000.

The result is a $2,264 larger gift—an increase of 22.64% for the same after-tax cost as giving cash!


NOTE: This calculation is provided for educational purposes only. The type of assets transferred, the actual date of the gift, and other factors may have a material effect on the amount or use of your deduction. You are advised to seek the advice of your tax advisors before implementing a gift of this type.

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