Why is it important to record the cost basis of an asset before donating it?

Stock

When you donate an appreciated asset to a Donor-Advised Fund (DAF) like Daffy, you can deduct the full fair market value of the asset from your taxes, not just your cost basis. This means you can potentially deduct more than what you initially paid for the asset. Moreover, because Daffy is a 501(c)(3) organization, it doesn't have to pay taxes when it sells the asset. This means the full value of your donation goes directly to the charity you care about. Let's go back to our example of the couple who sold their Apple stock. If they had donated the stock to Daffy instead of selling it, they could have avoided the $5,468 tax bill entirely. Plus, they could have deducted the full $87,500 fair market value of the stock from their taxes, potentially saving them an additional $29,175 in taxes (33.3% of $87,500). In addition, Daffy offers a unique advantage for those who want to donate assets like stocks, ETFs, index funds, and even cryptocurrencies. Many non-profits don't have the capability to receive these types of assets, but Daffy does. This makes Daffy a great option for those who want to maximize their charitable impact and their tax savings. In conclusion, recording the cost basis of an asset before donating it is crucial for tax purposes. It allows you to understand the potential tax benefits of donating the asset versus selling it. And if you're looking to donate appreciated assets, Daffy is a fantastic option that can help you maximize your charitable contributions and your tax deductions.

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.

Get your Daffy account
Simplify your giving with Daffy, the Donor-Advised Fund for You™. Easily donate to almost every US public charity, track tax-deductible contributions, and access donation receipts all in one place.
Try Daffy for free
Daffy waives all membership fees for members with less than $100 in their fund, so get started today for free!

Don’t forget to download the app

Scan the QR code to get the iPhone app

Download on the App Store.
QR code to download the app from the App Store.

Sources