We know supporting nonprofits is something important to many of Earth Equity’s clients, and the opportunities to give are truly endless! In addition to volunteering your time, writing a check, or making a qualified charitable distribution, you can also donate stock to most nonprofits.
Donating stock can be a win-win for you and your favorite nonprofit
It all comes down to navigating the capital gains tax, which applies to individuals, but not to most charities. If you sell stock, that money is considered income and you will have to pay taxes on it, even if you donate all of the cash from the sale to a nonprofit. But if you donate the stock directly from any non-retirement account (e.g., a trust, a joint account, or an individual account), the ownership of the funds transfers to the nonprofit, which can then sell it without having to pay taxes on the proceeds. Essentially, this process ensures that your nonprofit receives the entirety of your generous gift!
On the other hand, when is donating stock not a good idea?
- If you are over the age of 72, you can weigh this option against making a qualified charitable distribution from a retirement account. This process is similar in that the nonprofit is still not required to pay taxes, but it can also help you offset the tax burden of your minimum distribution.
- If a stock in your non-retirement account is worth less than its purchase price, it may be more beneficial for you to sell the stock and take advantage of the investment loss through a process called tax-loss harvesting.
So, how do you make a stock donation?
If you’ve decided that donating stock is appropriate for your unique situation, you’ll first want to reach out to your preferred nonprofit to ensure that they accept stock donations. If they don’t, they may be open to your financial advisor opening an account for them so that they can! If the nonprofit does accept stock donations, you can connect the nonprofit with your financial advisor to help you with this process.
And always remember to request that the nonprofit confirm the date of receipt, the name of the stock and the number of shares for you to keep on hand when you file your taxes.