Making a gift of appreciated stock or other assets is a great way to support the Eye & Ear Foundation, researchers, and other initiatives important to you—often with several potential tax advantages.
The federal government taxes the capital gains on securities (the difference between the price at which you purchased a stock and the price at which you sold it) at rates as high as 20%. That rate can go as high as 28% for artwork and other collectibles.
When you donate stocks (including mutual funds) or other assets held for more than a year directly to the Eye & Ear Foundation, the gain is exempt from all capital gains taxes. Additionally, you could receive an income tax deduction equal to the full value of the appreciated asset on the day it is transferred to EEF.
Give appreciated assets directly to EEF or the IRS will impose capital gains tax on your sale.
An Example: Benefits of Contributing Appreciated Assets Directly to EEF versus Selling the Assets and Contributing the Proceeds or Donating Cash
Bought 100 shares of Coca-Cola stock in October 1993 at $10/share = $1,000.
Sell or donate the same 100 shares in September 2019 at $54/share = $54,000.
If you contribute the stock directly to EEF, your charitable income tax deduction is for the full market value, $54,000. In addition, you will not be liable for tax on the $53,000 in capital gains. If you are in the 37% income tax bracket, that could lead to a total tax savings of $30,580 (Income tax savings $19,980 + Capital gains tax avoidance $10,600).
If you sell the stock and contribute the proceeds to EEF, your capital gain is $53,000 which can be taxed as high as 20%. If you were to put aside the monies needed to pay that capital gain tax from the sale proceeds, your charitable gift to Pitt would be $43,400 and the tax savings of that charitable gift (based on a 37% income tax rate) would be $16,058.
If you contribute $54,000 cash rather than using your appreciated assets, you would be eligible for an income tax savings of as much as $19,980 (based on a 37% income tax rate), but you would not enjoy any capital gains tax savings.
|Original cost: $1,000 Current value: $54,000 Capital gains: $53,000||Selling securities and donating the proceeds to EEF after donor retains the amount needed to pay capital gains tax||Donating your securities directly to EEF|
|Value of Gift||$43,400||$54,000|
|Charitable Income Tax Deduction||$43,400||$54,000|
|Income Tax Saved (37% rate)||$16,058||$19,980|
|Capital Gains Tax Avoided (20%)||$0||$10,600|
|TOTAL TAX SAVING||$16,058||$30,580|
When considering charitable giving, you should talk with your tax, legal, and financial advisors; EEF does not render these services.
To learn more, contact Craig Smith at email@example.com or 412-864-1450.