Likely due to a combination of the closing tax year and the Holiday cheer, Network for Good reports that nearly 30% of all giving is done during December. The best way to help your favorite charity and mitigate your tax bill is to carefully prepare how you contribute. For example, what you donate can matter as much as when you donate. According to HCR Wealth Advisors, here are a few factors to consider before you decide whether to donate stock or cash.
Both cash and stock are deductible
The federal tax law has recently changed in a number of ways. While the restrictions are more cumbersome, taxpayers may still be able to deduct donations to charity. Filers may be able to deduct up to 30% of Adjusted Gross Income in the form of appreciated stock donations. The personal impacts of tax law changes are part of the reason that HCR Wealth uses expert teams to create personalized wealth management plans.
Because HCR Wealth does not have a stake in the sale of financial merchandise, portfolio restructures to reduce taxes are a valuable part of the investment plan. With a potential tax liability of over 20% on capital gains, for example, there are some circumstances where avoiding potential profits from the sale of stock is beneficial. Donating appreciated stock directly from a portfolio to a charity effectively removes any liability from that stock.
Investors who plan to sell stock in order to make a cash donation may benefit from directly donating the stock. An appreciated stock sale will result in a capital gains tax. Therefore, a direct donation of stock would equal a cash donation plus the amount paid in capital gains.
HCR Wealth Advisors uses a comprehensive strategy that incorporates investments, charitable contributions, and retirement goals. Be sure to properly understand the nuances of stock versus cash donations, or hire someone who does, before making your choices.
This article is provided for informational purposes only and should not be interpreted as investment advice.