Donating Stock

• Many people who own a sizable portfolio of stock wish to give a portion of it to charity. How you handle this process can significantly affect your tax bill for the year. If you sell the stock first and then give the amount of cash that it generates to charity, you typically have to pay more in taxes than you would if you simply gave the shares of stock directly to the charitable organization instead.
  
  

Deduction

• When you donate stock to a charity, you get to deduct the fair market value of that stock from your taxable income. This means that you can look at what the stock is worth on the day of the donation and then deduct that amount from your taxes. This is the same as if you had simply made a cash donation to the charity. This deduction reduces your taxable income and the amount of tax that you have to pay the Internal Revenue Service.
  
  

Appreciated Assets

• When the value of your stock has increased since the time you bought it, it can provide you with another tax break. Usually, when you sell stock, you have to pay capital gains taxes on the difference between what you bought the stock for and what you sold it for. When you donate appreciated assets to a charitable organization, you get to change the basis of the stock to the price on the day that you donate. This allows you to get out of paying capital gains taxes and still get the deduction.
  
  

More Money to Charity

• When you donate stock to a charity, besides helping your tax bill, it also helps the charity. The charity gets more money with which to engage in its charitable work. When you give the charity stock, it does not have to pay taxes on the gains when it sells the shares. For example, if you sold $20,000 worth of stock, you may use part of that money to pay the taxes generated before giving it to the charity. If you give the stock directly to the charity, it gets to keep the full $20,000.