Giving Appreciated Securities
Nov. 20, 2017
By Jordan Richardson, Director of Charitable Giving
Whether the motivation is spiritual, festive or tax-motivated, it’s no secret that the fourth quarter is a popular time to think about charitable giving. There is even a rumor in our office that packing away your flip-flops triggers thoughts of philanthropy. Whatever the reason, now is a great time for charitable giving. Given the strength of the market in 2017, it may be an even better time to think about giving with appreciated securities. Here’s why:
1. Potential to Expand Giving Capacity
Consider this: According to a 2016 U.S. Trust study, 80 percent of high net worth individuals say cash accounts for less than 25 percent of their total net worth[i]. At the same time, 86 percent of them are making charitable gifts with cash, while only 5.5 percent use appreciated securities.[ii] In cases in which cash is a relatively small portion of an individual’s net worth, the use of appreciated securities could increase capacity for giving.
2. Avoid Capital Gains
The disposal of stock or mutual funds held for longer than 12 months may trigger taxation at the capital gains tax rate (15 percent for most individuals[iii]). However, if an appreciated security is gifted, in kind, to a public charity, including the Community Foundation, the tax-payer is off the hook. As we look back at a strong 2017, a gift of stock purchased as little as one year ago may have a significantly lower after-tax cost than a gift of cash.
3. Endow Iowa Benefits
It’s worth noting that a gift of appreciated securities to a charitable giving fund at the Community Foundation could be eligible for Endow Iowa Tax Credits. While the credits are exhausted for 2017, receiving a 2018 Endow Iowa Tax Credit, coupled with the 2017 federal tax deduction and avoidance of capital gains tax might be a win-win-win.
4. Give Now and Later
When your clients give a gift of appreciated securities to their charitable giving fund at the Community Foundation they have the unique opportunity to experience the joy of giving now and in the future. They make the gift today; receive the tax benefits and then support the causes they care about as needs arise. Our donors appreciate this simple approach to meeting both their short-term and long-term goals. Contact me at firstname.lastname@example.org to learn more.
[i] U.S. Trust. (2016). Insights on Wealth and Worth.
[ii] U.S. Trust. (2016). Study of High Net Worth Philanthropy.
[iii] For taxpayers in the 25, 28, 33, and 35% marginal tax brackets.
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