Giving Appreciated Stocks

FaithFi: Faith & Finance | Jul 22, 2024

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Show Notes

Stock markets have seen record highs in the past couple of months. Is it a good time to take profits?

Well, it certainly can be a good time to take profits if you’ve seen your investments go through the roof recently. And today, I want to tell you about a way to realize those gains for God’s Kingdom.

Why Donate Appreciated Stocks?

With recent historic highs in the markets, now is an excellent time to consider donating appreciated stocks to your church or other ministries. Donating stock instead of cash can significantly benefit both the donor and recipient, primarily due to its tax advantages.

The Benefits of Donating Stocks

Donating appreciated stocks to a ministry typically gets a higher tax deduction and avoids capital gains taxes. This means you can give more than you might if you donate cash. Here’s why:

Tax Deductible: The total value of the stock is deductible.
Avoid Capital Gains Taxes: There is no need to pay taxes on the appreciated value.

If the stock value has appreciated, donating it directly to a church or charity is usually the best option. However, if the stock has lost value, it’s better to sell it, take the deductible loss, and then donate the cash proceeds.

Understanding the Tax Benefits

The tax benefits of donating stocks depend on the type of organization you’re giving to and your adjusted gross income. Donating appreciated stocks allows you to use their fair market value as an itemized deduction if you’ve held the stock for over a year.

Let’s say you bought 50 shares of Mock Industries at $20 each, totaling $1,000. Those shares are worth $40 each, making your investment worth $2,000. If you sell the shares and donate the after-tax proceeds, you’d have to pay 20% capital gains taxes on the $1,000 profit, leaving you with $1,800 to donate. However, donating the stock directly means the church receives $2,000, which you can deduct from your taxes.

Some ministries may not be set up to accept stock donations and might ask you to sell the stock first. This is less efficient due to the capital gains taxes involved.

Using Third-Party Organizations

Organizations like the National Christian Foundation (NCF) can handle stock donations for you. By setting up a donor-advised fund or a Giving Fund, you can donate cash, stocks, or other assets, which NCF will liquidate and distribute to your chosen ministries. This method also offers flexibility in managing your taxes.

One significant advantage of using a Giving Fund at NCF is the ability to "bundle" your deductions. For instance, if you typically tithe $12,000 annually, you're still below the standard deduction of $14,600 for single taxpayers or $29,200 for married taxpayers filing jointly. However, if you donate $36,000 worth of stock into your Giving Fund, you can take the full deduction in one year, which can exceed the standard deduction, then spread out your actual donations over the following years.

Donating appreciated stocks is a powerful way to increase your giving while reaping significant tax benefits. By leveraging tools like donor-advised funds from organizations like the National Christian Foundation, you can maximize your impact on God’s Kingdom while minimizing your tax burden.

On Today’s Program, Rob Answers Listener Questions:

Is there a statute of limitations for a collection agency to collect credit card debt?
What is the best way to move multiple 401(k)’s from past employers to one account?
About $750,000 was invested with my investment manager across a few investments. I'm being charged 1% in fees, which I understand is standard, but another company mentioned most of my investments are in just 6 ETFs, so there is little active management involved, and I should be charged closer to 0.8%. Given the passive nature of the strategy, I would like a second opinion on if 1% seems too high. I also have about $50,000 left on my mortgage with a rate of 2.75%, and I can pay it off this year. I'm figuring out whether I should pay it off early.

Resources Mentioned:

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