Outright gifts and stocks

A gift of cash is simple and convenient.

When most people are asked to make a charitable gift, they reach for their checkbook. Why? Because giving cash is simple and convenient. For small gifts, giving cash certainly makes sense; but when the donation gets larger, you should consider giving appreciated assets such as publicly-traded stocks or mutual funds.

Giving Cash

Suppose you would like to make a $10,000 gift to your favorite charitable organization. If you write a check for $10,000, you will receive a $10,000 charitable income tax deduction. If you are in a 35% income tax bracket (federal and state) and itemize your deductions, you will reduce your taxes by $3,500 ($10,000 x 35%). The net cost of your gift will be $6,500 ($10,000 - $3,500).

Giving Appreciated Securities

Now, suppose instead of giving cash, you donate $10,000 of publicly-traded stock you purchased ten years ago for $2,000. First, just like a gift of cash, you will be able to claim a $10,000 income tax charitable deduction, thereby reducing your taxes by the same $3,500.[1] You will also avoid paying the capital gains tax you would have paid if you had sold the stock rather than giving it to charity.

If you sell the stock, you will realize an $8,000 long-term capital gain. If you are in a (federal and state) 20% capital gains tax bracket, you will pay $1,600 ($8,000 x 20%) in capital gains tax. However, by donating the stock instead, you will forever eliminate this potential tax liability.

By giving stock instead of cash, your gift's net cost will be further reduced from $6,500 to $4,900!

How Much More Can You Give?

If giving $10,000 cash costs $6,500 after-tax, how much more stock can you give for the same after-tax cost as giving cash by taking into consideration your additional capital gains tax savings? Based on these assumptions, you can give $13,265, nearly 33% more!

By funding your charitable gifts with appreciated securities, you can either give the same amount for a lower tax-cost ($4,900 vs. $6,500) or give more for the exact after-tax cost as giving cash ($13,265 vs. $10,000). The choice is yours!

Giving Stock You Want to Keep

If you own highly appreciated stock, you would like to keep, consider still funding your charitable gifts with that stock and then use the cash you would have donated to purchase new shares of the same stock, even on the same day! You will increase the cost basis in your newly repurchased shares to the new repurchase price! That can save more taxes later!

Receive a tax deduction for using these as gifts

You can support our mission and reduce or even eliminate federal capital gains taxes of the transfer by donating appreciated securities or mutual funds that you have held for more than one year. You may also be entitled to a federal income tax charitable deduction based on the securities' fair market value at the time of the transfer.

Securities are most often used to support our work in the form of:

• An outright gift. When you donate securities to the BMHS, you receive the same income tax savings that you would if you wrote us a check, but with the added benefit of eliminating capital gains taxes on the transfer, which can be as high as 20 percent.

• A transfer on death (TOD) account.* By placing a TOD designation on your brokerage or investment account, that account will be paid over to one or more persons or charities after your lifetime.