Tax Refunds & Advice

Although there is nothing wrong with donating cash to your favorite charity or organization, there are other options that you can consider. For instance, have you ever looked into donating stock instead? Believe it or not, donating securities over cash contributions is becoming more and more popular. While this process may not be as well known as simply donating cash, there is not much too it if you are willing to learn.

Donating appreciated stock offers many tax advantages. But in order to take advantage of all these benefits, you need to first look into a few details.

First things first, look into how long you have held the stock. Is it more or less than one year? Most people know the answer to this question off hand, but if you do not, find the answer right away; it is very important as you move forward. Next, find out the fair market value of the stock. This is the amount of cash that you would receive if you were to sell the stock on the spot.

The amount of time that you have held your stock will determine the benefits that you can take advantage of. If you have held the stock for less than one year, you can deduct the fair market value at the time minus the appreciation since you purchased. For instance, if you bought stock for $1,000, kept it for less than a year and donated when it reached $1,300, your deduction would equal $1,000.

On the other side of things, if you have held the stock for more than one year, your situation will be entirely different. In this case, you should be able to deduct the entire market value.

Donating stock is not as difficult as you may think. Generally speaking, all you have to do is transfer ownership of the shares that you are interested in donating. While it is not quite this simple, your stock broker can lend some assistance.

The next time you think about donating cash, make sure you first consider the tax benefits of donating stock instead.