Donating appreciated securities such as stocks or mutual funds
Donating stock or a mutual fund holding to NSRWA allows you to be generous in a tax savvy way.
Here are three compelling tax advantages that make this approach so attractive:
- Avoid Capital Gains Tax: By donating stock that has increased in value (and has been held for over a year), you can avoid paying capital gains tax on the growth. This can save up to 28.8% in (Federal and Massachusetts) taxes compared to selling the stock and donating from the cash proceeds.
- Receive a Charitable Deduction for the full value: You may deduct the full value of the stock on the day you make the donation, (up to 30% of your Adjusted Gross Income). This can significantly reduce your income tax liability.
- Maximize Your Impact: This works best in a portfolio where you have some real winners you’ve held for a long time: the ones with the biggest gains. Rather than pay up to a third of your gains in taxes, you can donate the full amount, and get a tax deduction for the full amount. Since neither you nor NSRWA will pay capital gains tax, the full value of the asset is available as a gift to the NSRWA.
Example: Suppose you bought shares of a company for $5,000 several years ago, and they’re now worth $20,000. If you sell the stock, you could owe up to $4,250 in capital gains tax (20% to the feds, 3.88% net investment income tax, 5% to Massachusetts, plus 4% MA millionaire’s tax if you’re in that category). But if you donate these shares directly to NSRWA, you avoid the tax and can claim a $20,000 charitable deduction! A win for you and NSRWA!
How to initiate a transfer to NSRWA
The below fillable form contains all the fields you’ll need to initiate the transfer, including information on the Vanguard account to which the assets should be transferred. Please complete the form, print and sign it, and submit it to your brokerage firm. To ensure that the transferred assets are credited properly by NSRWA, please send a copy of the completed form to Joe Regan at joe@nsrwa.org
This direct transfer of shares will avoid capital gains taxes, while you enjoy a deduction for the entire value. The value of your deduction is based on the stock’s average market price on the date of transfer. You may request that avergae price figure from your broker.
The content here is provided as a guide to help laypeople understand some of the fundamentals of tax-efficient giving based on current laws and regulations which may change without notice. Content here should never be considered or counted on as professional advice. Always seek qualified advice from legal, tax, and accounting professionals for your own personal situation.