Why is Giving Appreciated Stock a Good Choice?
Many people own appreciated stock — stock that has risen in value over time. For example, Steve has a stock account with a well-known brokerage company. One of his stocks has grown from $15 a share to $75 a share over the past few years. If he asked his broker to sell the stock he would owe tax on the $60 of appreciation for each share that was sold. However, if Steve gave the stock to Watershed, he would avoid this tax on the appreciation and receive, instead, an income tax deduction on the full value of the stock. What’s more, because Watershed is a qualified charitable organization, it could sell the stock and avoid any tax on the appreciation. A win for Steve; a win for Watershed.
Let’s say Steve decided to give 100 shares of this stock as a year-end gift to Watershed. In making the gift, he would obtain a charitable income tax deduction of $7,500, even though he only paid $1,500 for these shares originally. If he happens to be in the 31 percent tax bracket and claims the deduction on his itemized tax return, he could possibly save $2,325 in taxes — more than he paid for the stock in the first place.
Historically, year-end is a popular time for making stock gifts. Many thoughtful donors review their stock portfolio and select stocks that have appreciated the most and have been held for more than a year. To learn more about giving appreciated stock consult your financial advisor or CPA or contact Watershed at (207) 882-6075 or at firstname.lastname@example.org.