Most of us donate to charity. Coworkers send us requests to donate cash for their causes, we may identify charities on our own, and most of us make at least one trip to our local goodwill to donate used household items. This year I decided to research stock donations. I had heard about this method over the years – through podcasts and various news articles, but on the surface it seemed complex and it invariably landed at the bottom of my to do list.
After another strong bull market, I decided to give it a go. Turns out, it’s super easy. Best of all, you can avoid large taxable gains, give more to charity, and consequently deduct more on your tax returns.
Here is a simple example:
| Current Value of Stock | $500.00 |
| Original Cost | $250.00 |
| Gain | $250.00 |
| Income Taxes | $87.50 |
| Gross Proceeds | $500.00 |
| Less Income Taxes | $87.50 |
| Net Proceeds | $412.50 |
In this example, I donate $500 of stock and deduct the full amount on my tax return. If I had sold the stock, I would only have $412.50 to donate since I would pay $87.50 in taxes.
To kickoff the process I opened a Fidelity Charity Giving Account. I had sizable gains in Facebook and Uber, transferred a few shares to the account and identified charities. As you can imagine, most charities do not have the resources to manage stocks so Fidelity acts as a intermediary to sell the stock on my behalf and transfer the full value in cash to the charity. I earn my tax deduction on the day the stock is transferred to Fidelity. Any amounts not yet donated to charity remain in my Fidelity Charity Giving Account. For more information, visit Fidelity here: Fidelity Charity Giving Account