Give the Gift of Stock

As we near the end of the year, we want to make you aware of the positive implications for you, if you make a gift of appreciated stock. As you may know, the current top capital-gains tax rate of 15% is set to expire on Dec. 31 and revert to 20%, unless Congress acts soon. What’s more, a new 3.8% surtax will take effect in January. Passed in 2010 as part of the health-care act, the tax will apply to investment income for taxpayers with adjusted gross incomes of either $200,000 or more (if single) or $250,000 or more (if married), potentially pushing the top long-term capital-gains rate to 23.8%. Will Congress act? Your guess is as good as mine.

Have you, or are you planning to sell appreciated investments to avoid the potential capital gains increase? If you took advantage of today’s historically low capital gains rates you can use charitable giving strategies to minimize the resulting capital gains tax. If you are planning to sell your investments you can create a win-win situation for yourself and RMHCK. If you donate long-term capital gains property, which includes appreciated publicly traded securities you have held for more than one year, you can deduct the property’s full fair market value (FMV). In addition to enjoying the deduction, you will avoid having to pay capital gains tax on the appreciation, which generally is the FMV less original purchase price. Because of its tax-exempt status, RMHCK can sell the stock immediately without any tax impact.

For example, when you give $1,000 in cash you get to deduct $1,000, and that saves you $250 if you’re in the 25% tax bracket. But what if you donate $1,000 in appreciated securities instead of cash? Let’s pretend you purchased those securities for $500. If you sell the shares you’ll owe $75 in tax on the profit, even at the current favorable 15% capital-gains rate. If you donate the shares, the charity gets the full $1,000, you avoid the $75 tax bill, and you still get to deduct the full $1,000. You save $325, the $75 in capital gains plus the $250 in the 25% tax bracket.

For more information about giving stock, please contact our Director of Development.

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