It’s A Great Time to Donate Stock to Charity

With the recent appreciation in the stock market, now would be a great time to consider making a charitable donation of appreciated stock to your favorite cause. Not only have stock values soared in the past year plus, but there are also significant advantages to donating stocks (from a taxable account) instead of cash. 

In short, by donating appreciated stock, you are able to minimize the amount you pay out of pocket while maximizing the amount the charity receives. 

Tax Advantages of Donating Stock

How does it work? When donating appreciated stock to a 501(c)(3) non-profit organization like Oceanic Society, U.S. taxpayers who itemize their deductions are able to take an income tax deduction for the full fair-market value of the donated assets (usually up to $100,000 each year from a taxable account), without having to pay capital gains taxes on the appreciation. And the recipient organization (Oceanic Society) gets to use 100% of the proceeds if they sell the assets on receipt.

Example: 2021 Stock Donation Yields 25% Bigger Donation

Let’s look at a recent example from one of Oceanic Society’s Chicago-based donors, who gives $10,000 to Oceanic Society each year. This year, instead of writing a check, he chose to donate an equivalent amount of appreciated stock, which allowed him to contribute nearly 25% more. Here’s how it worked:

• April 9, 2020: Donor purchased 100 shares of Peloton stock for $2,847 
• April 12, 2021: The value of 100 shares of Peloton had appreciated to $11,630
  1. Scenario A: Sell the Stock and Keep/Donate the Proceeds. Donor sells the shares, realizing a long-term capital gain of $8,783 and incurring income tax of $2,196, resulting in after-tax proceeds of $9,434 that he could donate to Oceanic Society.
  2. Scenario B: Donate the Stock Directly. Donor does not sell the shares, but donates them directly to Oceanic Society for a charitable contribution equal to $11,630, their fair market value. With the donor’s marginal federal tax rate of 37%, and a state tax rate of 5%, he gets a tax deduction of $4,885. Oceanic Society sells the shares upon receipt, netting $11,630.

As a regular supporter of Oceanic Society, the donor was able to use the tax advantages of contributing appreciated stock to contribute nearly 25% more to Oceanic Society for roughly the same net cost as his normal annual contribution of $10,000. The shares of stock that he donated were worth $9,434 to him (the value after taxes), but yielded $11,630 for Oceanic Society.

How to Donate Stock to Oceanic Society

If you are interested in donating stock to Oceanic Society, your financial institution can transfer any appreciated stocks directly to Oceanic Society’s brokerage account. You will avoid paying capital gains tax on the appreciation, yet will be eligible to deduct the full fair-market value of the donated assets (usually up to $100k annually). All financial situations are different, and we recommend that you contact your tax advisor regarding your specific situation.

You can find detailed instructions for donating stock to Oceanic Society on our stock donations page. And if you have any questions about making a charitable donation to Oceanic Society using appreciated stocks, please contact us at donations@oceanicsociety.org.

Cryptocurrency Donations Also Offer Tax Advantages 

Donating cryptocurrency to charity offers the same tax advantages as donating stock. Just like with stocks, when you donate cryptocurrency you do not have to pay capital gains tax on the appreciated amount, and you can deduct the fair-market value of the donated cryptocurrency on your taxes. Oceanic Society now allows supporters to donate cryptocurrency directly to support our conservation programs. You can learn more on our Donate Cryptocurrency page.