For example, let's suppose own shares of a stock you bought five years ago for $1,000 that are now worth $5,000. By donating this stock instead of selling it, you get a deduction for the stock's fair market value on the date of the gift, plus you avoid paying long-term capital gain taxes on the $4,000 profit on your initial invested. And, Mike Silva International would receive the full $5,000 value of your donation.

To qualify for this special tax benefit, you must have held the stock for longer than one year. If the shares have been held for one year or less, your charitable deduction per IRS rules is limited to your initial investment – in the case of our example, $1000. The IRS also limits the charitable deduction of appreciated property to 30 percent of your adjusted gross income.

There is another advantage to donating stocks, bonds or mutual fund shares. If your portfolio had some losses, you would typically write them off against your gains to minimizing the capital gains tax. But if you give away your gains, you can still use your losses (up to $3,000 a year) to reduce your regular income. For most people, this can produces a greater tax benefit since income tax rates on regular income are generally higher than on long term capital gains.

« Back