Donating stock to charity can be a win-win situation for both the donor and the recipient. This year, the stock market has seen incredible returns, leaving many investors with significant gains and the associated tax implications. However, by donating stock to charity, you can maximize your tax deductions and make a bigger impact on the charities you support.
Let's consider a simple 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. 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.
However, 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.
The only catch is that most charities across the United States aren't set up to take stock donations directly. This is where Daffy comes in. Daffy is a Donor-Advised Fund (DAF) that makes it easy for you to donate stock to your favorite charities. With Daffy, you can donate your stock, get a tax deduction, and then recommend grants to any IRS-qualified public charity. It's a simple, tax-efficient way to support the causes you care about. So why not maximize your tax deductions and make a bigger impact by donating stock to charity through Daffy?
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.