3 benefits of donating stock to charity

If you’ve ever donated to a nonprofit, you’re probably familiar with cash giving — you write a check or make a credit card payment, and your money is put to work supporting the causes you love. But did you know that cash isn’t the only thing you can donate to charity? Many donors are choosing to give shares of stock because it comes with some pretty big benefits.

But first, what is stock? Stocks are a type of investment that represent an ownership share in a company. When a stock increases in value over time, that’s known as “appreciation.” While it might seem confusing or difficult to donate stock, it’s actually pretty simple. We’ve streamlined the process with our stock donation tool, so you can make a bigger impact on causes you care about.

Here are the three reasons why the smartest donors are giving stock today:

1. Donating stock is the most tax-savvy way to give.

That’s right — for the vast majority of donors, giving stock is the smartest way to support the causes you care about. It allows you to save on your taxes in two ways: by avoiding capital gains taxes, and by allowing you to take an income tax deduction.

Let’s break that down:

Avoiding capital gains taxes

A “capital gain” is the profit you make when you sell a share of stock. For example, if you buy a share of Apple for $100 and sell it five years later for $300, your capital gain on that share is $200.

The U.S. government taxes capital gains, so when you sell stock, you have to pay taxes on what you earned. This is called a capital gains tax. (Some states also tax capital gains.) Depending on your income bracket, you could be taxed up to 20% on your capital gains. And if you own the stock for less than a year, it could be taxed even more since it’s treated as regular income.

However, if you give this stock to a charity instead of selling it, neither you nor the charity have to pay taxes on it. In the Apple stock example, if you sold the stock, you might pay up to $40 for that $200 gain. But by donating it, you save money, and give the nonprofit more.

Income tax deductions

Stock donations are also tax deductible. That means that when you file your federal taxes, if you itemize deductions, you can deduct the donation from your taxable income. Some states also give income tax deductions for stock as well. And when you lower your taxable income, you pay less overall in income taxes, saving you money again.

Don’t want to change your stock portfolio?

Giving stock is still the most tax-savvy way to give. You can always donate shares of appreciated stock, then repurchase the same number of shares immediately after, so your portfolio stays the same. When you do this, you eliminate all the capital gains on your previous shares, and reset your “cost basis” to the current price, possibly saving even more in taxes when you sell the new shares in the future.

2. Donating stock maximizes your gift — and your impact.

When you donate stock, your dollar goes further than if you were to sell the stock and donate cash. This is because the money you would have paid in taxes can instead go fully to the nonprofit, maximizing your philanthropic impact.

Remember that $40 you might have paid in taxes for selling the Apple shares? Well, that’s an extra $40 towards a cause you care about. By donating stock, you can give more money at no cost to you, providing a greater benefit for your favorite nonprofit. It’s a win-win for both you and the charities closest to your heart.

3. It’s easy to donate stock.

Donating stock may seem like a daunting process, especially if you’re new to investing. But we’ve simplified the process for you. In less than ten minutes, you can fill out an online form with your stock gift information, decide whether you want to finish and sign the form electronically or mail it in, and then submit your gift. Your preferred charity will be notified of your gift, and you’ll be able to claim a charitable deduction on your income tax returns.

When you use FreeWill, all of your data is protected with bank-level encryption. And we’ll never charge you a fee to make your stock donation, so 100% of your gift goes directly to the causes you care about.

Each year, more and more donors are discovering the meaningful benefits of stock donations. They are high-impact gifts that can empower your favorite organizations for years to come. Consider making a stock gift today to make a lasting impact on the causes you love.