As you approach retirement, a new sense of purpose might start to take center stage: You’ve worked hard and built both a life and built up your retirement savings, and now you might be wondering how to use your resources to make a difference.
Donating appreciated stock to charity can offer a beautiful opportunity to support causes that hold meaning for you. Not only can you contribute significantly, but you – and the organization you wish to give to – may also benefit from valuable tax advantages that help your dollars do even more good.
But deciding to donate stock and knowing how to donate stock to charity are two different hurdles. To help you along the way, we’re sharing this quick guide to the benefits of stock donations, steps to getting started, and resources you can use along the way.
How Donating Stock Benefits You and Your Favorite Cause
Contributing to a local cause allows you to see the direct impact of your generosity within your community. It also comes with some substantial financial benefits, including:
- Avoidance of Capital Gains Tax: When you sell appreciated stock, you typically owe capital gains taxes on the profit. Donating the stock to charity bypasses this tax altogether, allowing you to contribute the full value of the stock to the cause.
- Immediate Tax Deduction: You can claim a tax deduction for the fair market value of the donated stock on your current year’s tax return. This can significantly reduce your taxable income and bump you into a lower tax bracket.
- Increased Charitable Impact: By donating appreciated stock, you essentially contribute a larger amount to charity than you would with cash, as the value of the stock is deducted before taxes.
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You can use an online tool like Fidelity Charitable’s Asset Donation Calculator to make the most strategic decision and get a better estimate of how your donation will affect your wallet. This tool helps estimate the potential tax benefits of donating different assets, allowing you to select the most impactful approach.
How to Donate Stock to Charity
Donating appreciated stock (or stock that has increased in value since you purchased it) is a fairly straightforward process of transferring it from your brokerage account to the charity’s brokerage account. Most major organizations are readily equipped to receive stock donations, including, but if you’re hoping to help a few causes closer to home, many smaller charities (such as animal shelters, environmental organizations, or local food banks), also accept stock donations – you’ll just need to check with them before getting started.
Related: Why We’re Proud to Partner with Lumina Hospice in Corvallis
Here’s a step-by-step guide to navigate the process smoothly:
1. Choose your charity
First, you’ll need to identify a qualified 501(c)(3) nonprofit organization that aligns with your values.
Think about the causes you’re passionate about – perhaps environmental protection, animal welfare, medical research, or educational opportunities? Many reputable charities have robust online presences, allowing you to research their mission, impact reports, and financial health.
2. Gather information
The organization will typically provide you with their brokerage account information, including the name of the brokerage firm, the account number, and the DTC (Depository Trust Corporation) number. Think of these details as the “shipping address” for your stock transfer.
3. Contact your brokerage firm
Next, inform your own brokerage firm and financial advisor of your intention to donate stock. You’ll need to provide the charity’s brokerage account information you obtained in step two.
Your broker and/or advisor will guide you through the specific steps involved in the transfer process, which typically involves a few simple forms and authorizations.
4. Document your donation
For tax purposes, it’s crucial to maintain detailed records of your stock donation. Here’s what to keep on file:
- The Date of Donation: Record the exact date you initiate the stock transfer from your account.
- The Charitable Organization: Note the full legal name of the charity you donated to.
- The Number of Shares Donated: Document the exact number of shares you contributed.
- The Fair Market Value: Obtain the fair market value of the stock on the date of donation. This value will be used to calculate your tax deduction. Many online financial resources provide real-time stock quotes, or you can obtain a verification from your broker.
5. Lean on your advisor for guidance
Navigating stock donations, especially when dealing with complex portfolios, can benefit from the guidance of a financial advisor. They can help you:
- Evaluate the Tax Implications: They can analyze the potential tax savings associated with donating different stocks.
- Consider Your Overall Financial Plan: Donating stock is just one piece of your overall charitable giving strategy. An advisor can ensure that your donations align with your long-term financial goals.
- Navigate the Transfer Process: They can ensure the donation process is completed accurately and efficiently.
Donating stock to charity is a great way to give back and build your legacy – and with just five simple steps, you can get started today.
Ready to Make A Difference?
We believe in empowering our clients to achieve their financial goals while making a positive impact on the world. If you’re considering donating stock to charity, we invite you to schedule a meeting with our team to discuss your options and develop a personalized strategy.
