Tax & Estate Planning

Tax Legislation and Charitable Giving

Donate Long-Term
Appreciated Securities

Expiration of IRA charitable rollover provision
The provision which allowed a qualified charitable distribution (QCD) from an IRA expired on December 31, 2013. Although Congress has reinstated QCDs a few times since their inception in 2006, there is no certainty that they will be reinstated for 2014 and beyond.

Donate Long-Term Appreciated Securities

Fidelity Charitable donors are always looking for ways to make their charitable dollars go farther and make more of a difference to the causes they care about. Donating long-term appreciated securities directly to Fidelity Charitable — rather than selling the assets and then donating the cash proceeds — is one of the best and easiest ways for donors to give more. By taking advantage of the applicable tax incentives, donors can significantly increase the amount of funds available to them for charitable giving.

One of the most tax-efficient ways to give

A charitable contribution of long-term appreciated securities — i.e. stocks, bonds and/or mutual funds that have realized significant appreciation over time — is one of the most tax-efficient of all ways to give. This method of giving has become increasingly popular in recent years: donations in the form of appreciated securities comprised 62 percent of all incoming assets to Fidelity Charitable in 2013. The two key advantages:

  • Any long-term appreciated securities with unrealized gains (meaning they were purchased over a year ago, and have a current value greater than their original cost) may be donated to a public charity and a tax deduction taken for the full fair market value of the securities — up to 30% of the donor's adjusted gross income.
  • Since the securities are donated rather than sold, capital gains taxes from selling the securities no longer apply. The more appreciation the securities have, the greater the tax savings will be.

Donating Appreciated Securities: A Win-Win for Donors and Charities Alike1

The table below illustrates potential tax savings for a couple with an AGI of $500,000, filing jointly, making a direct donation of a long-term appreciated security — with cost basis of $20,000, and long-term capital gains of $30,000 — to Fidelity Charitable.

  Donate Stock: Contribute securities directly to charity Donate Cash: Sell securities and donate proceeds
Current fair market value of securities $50,000 $50,000
Capital gains and Medicare surtax paid2 (23.8%) $0 $7,140
Charitable Contribution/Charitable Deduction3 $50,000 $42,860
Value of Charitable Deduction Less Capital Gain Taxes Paid2 (Assumes donor is in the 39.6% federal income tax bracket) $19,800 $9,833

The donation of appreciated securities to a charity with a donor-advised fund program, like Fidelity Charitable, offers additional, unique advantages. A single contribution to Fidelity Charitable can fund a donor's Giving Account® and then the donor can recommend grants to many other public charities. By contrast, donating long-term appreciated securities directly to individual charities requires working separately with each of those charities, which may take substantial time and effort. In addition, some charities either do not accept appreciated securities at all or will only consider them for very large donations.

In the end, of course, these tax advantages for individuals also have the effect of benefiting the charitable grant recipients: the capital gains savings are transferred directly to the Giving Account, increasing the amount of dollars available for grants. If you are looking to maximize the power of your charitable contributions — to make a single asset make more of a difference to the charitable causes you care about — consider donating your long-term appreciated securities.

1 This is a hypothetical example for illustrative purposes only. State and local taxes, the federal alternative minimum-tax and limitations to itemized deductions applicable to taxpayers in higher-income brackets are not taken into account. Please consult your tax advisor regarding your specific legal and tax situation. Information herein is not legal or tax advice.

2 Assumes all realized gains are subject to the maximum federal long-term capital gain tax rate of 20% and the Medicare surtax of 3.8%. Does not take into account state or local taxes, if any.

3 Availability of certain federal income tax deductions may depend on whether you itemize deductions. Charitable contributions of capital gain property held for more than one year are usually deductible at fair market value. Deductions for capital gain property held for one year or less are usually limited to cost basis.


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The views and opinions of third-party content providers are solely those of the author and not Fidelity Charitable. Fidelity Charitable does not guarantee the accuracy of the information provided by such third parties. Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Fidelity Charitable does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. Fidelity Charitable makes no warranties with regard to the information or results obtained by its use. Fidelity Charitable disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.