What would you say if I told you there was a simple way for you to save money on taxes and make a bigger impact on the charities you support? That simple tip? Donate stock to charity instead of donating cash.
So how can donating stock to charity save you money on taxes? Let's look at a simple example.
Let's pretend that you were a long-term investor in Apple Computer and that you 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.
Now if you're like a lot of generous people with a windfall like that, you might be thinking about how to donate some of those gains to charity.
But the problem is taxes.
If you have a gain of $10,000, you might have a tax bill of as much as $3,000 if you sell that stock.
So if you have $15,000 in Apple stock, you have two choices.
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.
That by itself is huge, but there's a second benefit to donating stock.
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.
Remember, charities are not-for-profit organizations, so when they sell the stock you donate, they don't owe any capital gains taxes either.
So the charities you support get more resources, and you end up with a lighter tax bill.
The only catch is that most charities across the United States aren't set up to take stock donations directly.
In fact, out of the over 1.5 million not-for-profit organizations across the United States, only a few thousand are set up to take stock donations.
But this is where a donor-advised fund like Daffy can help.
When you contribute stock to Daffy, you get a full tax deduction for your charitable contribution, and then you can give money to any of 1.5 million charities all across the United States.
It's a win for you, and it's a win for the organizations you support.
So if you're looking to lower your tax bill and maximize your generosity to the organizations you support, join Daffy.
It's the donor-advised fund for you.
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.