Gifts of Securities: Getting Started
A stock portfolio is often among the most valuable assets you own—and one that can carry substantial capital gain, or appreciation in value. With careful planning, you can reduce or even eliminate federal capital gains tax while supporting our work. Read on to see why donating securities can offer even more tax benefits than writing a check.
Stocks are considered to be appreciated for tax purposes if they're worth more now than when you purchased them.
How It Works
As stock prices increase, so do the taxes you owe on the long-term capital gain, which are charged at a maximum rate of 20 percent (0 percent if your income falls below the 25 percent tax bracket and 15 percent if your income falls below the 39.6 percent bracket). But when you donate publicly traded stock you've owned for more than one year to a qualified charitable organization such as UC Davis Health System, you enjoy two major tax benefits:
- You will be exempt from paying capital gains taxes on any increase in value—taxes you would pay if you had otherwise sold the securities.
- You are entitled to a federal income tax deduction based on the current fair market value of the securities, regardless of their original cost.
Lucy wants to make a charitable gift of $10,000. She can make her gift with either cash or stock. She has a marginal federal income tax rate of 28 percent and is not subject to state or local income taxes. The stock's value is $10,000, with a cost basis of $4,000.
Cash Gift vs. Stock Gift
Type of gift
|Value of gift||$10,000||$10,000|
|Long-term capital gain if sold||N/A||$6,000|
|Long-term capital gains tax eliminated ($6,000 x 15% rate)||N/A||$900|
|Income tax savings ($10,000 x 28% rate)||$2,800||$2,800|
|Total tax savings (capital gains tax eliminated + income tax savings)||$2,800||$3,700|
|Net cost of gift (value of gift - total tax savings)||$7,200||$6,300|
In this example, using the stock instead of writing a check saves an added $900. A higher federal tax bracket and any state or local income taxes would further improve Lucy's results.
A tax or legal advisor can provide you with additional information. We would be happy to assist you as well. Simply contact Mark E. Schaal, M.B.A., CSPG at (916) 734-9310 or Planned.Giving@ucdmc.ucdavis.edu; we can work with you to find a way to give that meets your goals.
Getting Started | Is This Gift Right for You? | Case Study | How to Complete Your Gift | Action Items
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The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.