Total charitable impact

 

Donating appreciated securities in-kind

A contribution of appreciated securities can yield two very different results depending on how you donate it. Donating securities directly to a charity to sell is cost- and tax-effective, while selling the securities and gifting
the proceeds may minimize your savings.

The math: Suppose you are a taxpayer with $650,000 of adjusted gross income (AGI) and you wish to contribute to charity. You own appreciated securities with a market value of $150,000 that have appreciated by $126,050 since the purchase date. You have held the securities for more than one year, and long-term capital gains taxes apply. Below are two options for donating the appreciated securities to charity.

 
Sell securities and donate cash
Donate securities
in-kind
Strategy Sell securities for $150,000 and donate after-tax proceeds of sale to charity in cash. Donate securities worth $150,000 directly to charity.

Capital Gains Tax

Realize $126,050 gain and pay $30,000 in capital gains tax.1Donate remainder ($120,000) to charity. Pay no capital gains taxes.2
Income Tax Deduction Deduct $120,000 from taxable income and save $44,400 in income tax.3 Deduct $150,000 from taxable income and save $55,500 in income tax.3
Outcomes Charity receives $120,000 Charity receives $150,000
Your net tax savings: $14,400 Your net tax savings: $55,500

    

1The capital gains tax is calculated by multiplying the $126,050 gain by 23.8%. This figure represents the combined 20% capital gain rate for earners in the top tax bracket and the 3.8% Net Income Investment tax (NIIT).

2A gift is not a realization event by the donor. The charity recognizes the built-in gain when it sells the securities, but it pays no tax because it is exempt. 

3This taxpayer is subject to a 37% marginal tax rate due to his or her AGI. 
Note: This is a simplified hypothetical situation for illustration purposes only. Please consult a tax advisor before donating appreciated securities.