Donating Stock May Provide a Bigger Tax Break

Is it better to give stock or cash to a non-profit organization?

The best strategy depends on whether the stock has increased or decreased in value since you bought it and whether you have owned it for more than a year. Here are a few things to know about giving stock to charity to get the maximum tax break.

1) Giving appreciated stock you have held for more than a year is better than giving cash. If you donate stock that has increased in value since you bought it more than a year ago – and if you itemize deductions – you can take a charitable deduction for the stock’s fair market value on the day you give it away. You will also avoid capital gains taxes on the increase in value over time, which you would have had to pay if you sold the stock then gave the charity the cash proceeds. You can deduct the fair market value only if you hold the stock for more than a year before giving it away. If you have held it for less than a year, your deduction is limited to your cost basis – what you paid for the stock – not the current value.

2) If it is a losing stock, it is better to sell it and give the cash. If the stock has lost value, it is better to sell the stock first and give the cash to the charity. You will still be able to deduct your charitable donation if you itemize, but you will also be able to take a capital loss when you sell the investment.

3) Ask the charity and brokerage firm about the procedure and timeframe for giving stock. Most banks and brokerage firms require a letter of instruction or letter of authorization to transfer the shares to charity, and a mutual fund company may have a special form.

4) You can buy extra time with a donor-advised fund. If you would like to transfer shares when the value reaches a certain level but want extra time to decide which charity to support, you could give the stock to a donor-advised fund. You usually need $5,000 to $10,000 to open a donor-advised fund at a brokerage firm, mutual fund company or community foundation, such as the Tulsa Community Foundation. You can take a charitable deduction when you give the shares to the donor-advised fund, but you have unlimited time to decide which charities to support. The donor-advised fund may also accept privately held stock, real estate and other complex investments.

Information partially supplied by Kiplinger.

For more information contact Alison Anthony, President and CEO, at 918-583-7171 or