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Increase your gift to charity—and your tax deduction—with one simple strategy.
Make a bigger impact by donating long-term appreciated securities, including stock, bonds, and mutual funds, directly to charity. Compared with donating cash, or selling your appreciated securities and contributing the after-tax proceeds, you may be able to automatically increase your gift and your tax deduction.
It’s simple and easy. When you donate stock to charity, you’ll generally take a tax deduction for the full fair market value. And because you are donating stock, your contribution and tax deduction may instantly increase over 20%1. Would you prefer to donate bonds or mutual funds? The same benefits apply.
Consider this example of donating stock to charity with a Giving Account at Fidelity Charitable:
1This assumes all realized gains are subject to the maximum federal long-term capital gains tax rate of 20% and the Medicare surtax of 3.8%, and that the donor originally planned to sell the stock and contribute the net proceeds (less the capital gains tax and Medicare surtax) to charity.
2Total Cost Basis of Shares is the amount of money you have invested in the shares of a particular fund or individual security. It represents the basic dollar amount that, when compared to the price at which you sell your shares, tells you how much of a capital gain or loss you have realized.
3This assumes all realized gains are subject to the maximum federal long-term capital gains tax rate of 20% and the Medicare surtax of 3.8%. This does not take into account state or local taxes, if any.
4Amount of the proposed donation is the fair market value of the appreciated securities held more than one year that you are considering to donate.
Depending on the nonprofit organizations you choose to support, your gift could be transformed. Here is an example:
New barn for an animal rescue group.
New barn for an animal rescue group.
A new IT system to keep track of the animals’ medical records, monitor inventory of supplies and reach volunteers electronically.
5Assuming average costs of barn construction at $40 per square foot and fencing at $2,500 per 400m area, it’s possible to build a 100x100 square foot barn and fencing for 20 acres for this amount.
6Assuming average licensing fees for email ($300/month) and product management software ($100/month), this amount would cover six years of service.
Matt and Veronica, a married couple with several successful investments, were thinking of donating a portion of their stock to help fund a wildlife rescue group.
At first, they considered selling the stock and donating the proceeds to the group, because that seemed like the easiest option. Although they had established a private foundation in the past and also considered that option, their advisor pointed out some of the advantages of using a donor-advised fund to make the donation instead: the higher tax deduction, for starters.
Their advisor noted that the tax deduction for giving their stock to the private foundation would be limited to 20 percent of their adjusted gross income, while for a public charity with a donor-advised program, the deduction limit was 30 percent—a significant difference.
Have a Fidelity Investments brokerage account? Use our Appreciated Securities Tool to help find the most highly appreciated assets to donate. Log in to your Giving Account to get started.
Best of all, Matt and Veronica were able to lower their tax exposure and recommend a larger grant from their donor-advised fund than they would have been able to if they had sold the shares and donated the net proceeds as they originally planned.
By contributing the shares to Fidelity Charitable, they were able to eliminate their capital gains tax exposure and take a charitable deduction in the amount of the fair market value of the shares.
Should you donate cash? Appreciated securities? What are complex assets anyway? Learn what kinds of assets can be donated and what the best asset is for you to donate in your unique situation.Listen now
This hypothetical case study is provided for illustrative purposes only. It does not represent an actual donor, but is meant to provide an example of how a donor-advised fund can help individuals give significantly more for the causes they care about.