Looking to rebalance your portfolio? How do you contribute to something you feel passionate about? Jaime Zimmerman offers an attractive option.
We all have our favorite charities and non-profit organizations that we support and want to see succeed. Whether we give them money, our time or some of both, they are an important part of our community. While serving the underprivileged or championing an important cause, these non-profits depend on us to help.
Among many individuals, gifting appreciated securities like stocks, bonds or mutual funds is a popular option. It can be a simple way to help your favorite charity and provide a significant tax benefit as well. In addition, it may aid in rebalancing your portfolio while offering a more cost-effective avenue than donating cash.
There are often tax advantages you should consider. For example, if you were to sell appreciated stock and donate the cash, rather than the actual security, you would be responsible for the capital gains tax on that sale. Typically there is a 15% tax due on any gain if the security has been held more than 12 months. If held a year or less, the gain is subject to your regular income tax rate.
If, instead, you donate the security itself to the charity and let them sell it, there is no tax cost and they get the full benefit of the value of the gift. You get to claim a tax deduction for the fair-market value at the time of the gift, but check with your tax advisor about whether there are restrictions on what you can offset with respect to your adjusted gross income. Also, special tax benefits don’t apply to securities held less than one year.
There are other reasons to gift securities to a charity. It may give you an opportunity to readjust your portfolio or lock in a security’s greatly appreciated value. Perhaps a stock has become too great a percentage of your portfolio, and gifting it allows you to invest in other assets that help you to diversify.
Finally, if you are in the habit of giving monthly or weekly to an organization, like your church for example, you can eliminate the need to write out checks each week by making a one-time gift. This may help your personal cash-flow requirements, plus it saves time.
Gifting to a worthy charity provides a great way to give back to your community. All parties end up ahead, and you get the pleasure of helping a valuable cause.
Sampling of Community Non-Profits
• New Harvest Foundation
NHF channels charitable contributions exclusively to organizations working to promote gay, lesbian, bisexual and transgender (GLBT) rights, services, culture and community development.
Madison and south central Wisconsin’s lesbian, gay, bisexual and transgender community center.
• GSAFE (Gay Straight Alliance for Safe Schools)
A public benefit organization committed to safe middle schools and high schools for lesbian, gay, bisexual, transgender youths and all students.
• Perfect Harmony Men’s Chorus
Madison’s gay and gay-friendly chorus.
Madison’s queer theater troupe.