Donating stock to charity can be a win-win situation for both you and the charities you support. Whenever you sell a security, you trigger a capital gains tax based on the profit you make from the sale. This tax rate can add a substantial amount to your tax bill. However, if you donate your stock directly to a non-profit, you can save money on taxes and have a bigger impact on the charities you support.
Let's look at an example. Suppose you were a long-term investor in Apple Computer and had purchased shares at $50 a share years ago. Today, Apple is at $150 a share. So if you had purchased 100 shares, you would now have $15,000 worth of Apple stock with a gain of $10,000 over your original investment. If you sell the Apple stock and take the $10,000 capital gain, you might owe $2,000 in taxes, leaving you with just $13,000. That's less money for you, and it's also less money for you to donate to charity.
But if you donate the stock to charity, you win two ways. First, you never have to pay the capital gains tax. So at a 20% rate, that's a savings of $2,000 right there. Second, when you prepare your income tax return, you can deduct the full market value of the stock you donated, up to 30% of your gross income. That means if you donate $15,000 worth of Apple stock, you can deduct $15,000 off your income. At a 33.3% rate, that means you could deduct up to $5,000 off your annual taxes. As a result, when you donate stock, you end up with more money in your pocket, and the charity ends up with a larger donation.
This is where Daffy comes in as a great option for a Donor-Advised Fund (DAF). Most charities across the United States aren't set up to take stock donations directly. Daffy, however, is designed to facilitate this process, allowing you to donate stock easily and efficiently. By using Daffy, you can maximize your charitable impact and minimize your tax bill, making it a win-win for you and the charities you support.
Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.