Giving to charity is a priority for many people, donations can be a cash donation or giving some material goods to your local non profit. Another way to donate that you should consider is to give your favorite charity the gift of stock. Donating stock is both a gift to the charity that could last for years, and it is a greater tax deduction for you. It has the potential to do greater good than a cash donation of equal value.
How it works
When you contribute to a registered charity you are allowed to claim that donation as a tax deduction. If you plan to make stock part of your donation there are a couple of ways that you can go about it. Here is an example, you have stock that you bought several years ago and it has increased in value. You can sell the stock and then donate the proceeds. There would still be capital gains liabilities and deductions for the charitable donation, all dependent on your income level.
The second option is to donate the stock directly to the charity. You would not have to worry about capital gains and you simply transfer ownership of the stock to the charity. The charity then has the option of selling the stock or hanging onto it. Neither you nor the charity would be forced to pay taxes on the value of the stock as it appreciates. You would still get the tax deduction of the full value of the stock on the day the donation is made.
Other things to consider
There are a couple of rules if you want to donate stock to your favorite charity, and receive the best tax benefit from it.
You need to have had the stock at least one year to qualify for capital gains
No matter the value of the stock you can only donate 30% of your gross income but you can forward unused deductions for the next five years. You can deduct the just the cost and this would allow you to raise the deductible limit to 50% of your adjusted gross income.
The total amount you are allowed to deduct can change if your income becomes too high
Before you decide to donate some of your stock to your favorite charity talk to your accountant so that you can make the most of the tax deductions involved. Your accountant can help you make donations that work for you, the charity you want to contribute to as well as your financial goals.
Donating your time or money to charity is a great thing to do, helping those less fortunate than you builds strong communities. The decision to donate to charity is an act of kindness and one that you should be proud of. However the next step is a little harder and that is choosing the right charity to donate your money to. There are literally thousands of charities, which is great for those in need and the different causes that rely on charitable donations. Which one is right for you?
Pick Something that Means Something to You
Find a charity that supports a cause that resonates with you, perhaps you had a friend that lost a battle to cancer or you favor working with children or the homeless. It doesn’t matter the cause but you will be more passionate about it if it means something to you. Even once you have a cause that is near to your heart there will still be d
Go Global or Local
There are people in need of charitable assistance all over the world for a variety of different causes. Third world countries struggle with basic necessities such as food, water, shelter and education. However there are people at home that struggle to make ends meet too. How you help is up to you, globally you can make a bigger impact for less money, but locally you can see the difference your money is making.
Do Some Research
Now that you have narrowed down the field of charities, it’s time to look into these charities. Not all charities are well….charitable, they spend far too much money on overhead and administrative costs to do any real good. If you have chosen to work with a local charity then contact them and speak with the director. Look for anything that seems out of the ordinary, expensive office space or asking for cash donations. Many reputable charities will take cash donations, but make sure that you get receipts. Charities need to keep clean and orderly records and cash must be tracked. Checks or credit cards are a preferred method to make donations. Here is a video to show you what to look for in a reputable charity.
By now you should have a pretty good idea of the charity you wish to work with. Bear in mind that if you are not in a position to donate financially to your favorite charity, there are other ways that you can contribute. Do you have a special skill, or some spare time? Many charities are as desperate for volunteers as they are for money. Money, time or skill, donating to charity is good for you and your community.