Donating appreciated stock is one of the easiest ways to give more to the charitable organizations you love to support, including Rethos: Places Reimagined.
For many people, the value of their shares has appreciated greatly since they were purchased. Maybe a surge in value of one of your holdings has thrown your portfolio off balance. Perhaps you just want to refocus on other investment categories. If you also wish to support Rethos, this is an ideal opportunity to review your investment portfolio with a donation strategy in mind.
Donating stock directly to Rethos is one of the most tax-smart ways to give. According to a 2016 study by Fidelity Charitable, 80 percent of donors own appreciated assets, such as stocks, mutual funds, or bonds, but only 21 percent of those donors have contributed these types of assets to charity. Many of those potential donors missed out on significant tax advantages that their gifts could have provided, not to mention the tremendous benefit to the nonprofits they love to support.
Here are four reasons you should consider making a gift of appreciated assets to Rethos before year end:
You Can Give More!
By donating stock that has appreciated for more than a year, you are actually giving around 20 percent more than if you sold the stock and then made a cash donation. The reason is simple: avoiding capital gains taxes. The maximum federal capital gains tax rate is 20 percent on long-term holdings. Given that the Dow Jones Industrial Average rose from nearly 18,000 at the end of March 2016 to nearly 34,000 at the end of March 2021, you are likely to realize a taxable profit on the sale of assets you purchased in the past five years. But if you donate the stock directly to Rethos, there’s no capital gains tax to pay. Plus, you are still eligible to deduct the full fair-market value of the asset you donated from your income taxes, up to the overall amount allowed by the IRS. And remember that your appreciated assets can also include assets that are not publicly traded, like restricted stock or bitcoin.
You Can Potentially Reduce Future Capital Gains
Many investors have stocks that they love and want to hold for the long term. Any appreciation of that stock’s value confirms your belief in it, but it can also set the stage for substantial gains when you sell. Consider donating some of your appreciated shares and then buying new shares to reset your cost basis at the current, higher price. This will reduce your future capital gains tax exposure if the stock continues to grow in value.
You Can Give Your Investment Portfolio a Tune Up
If a review of your investment portfolio’s gains and losses shows that it’s time to rebalance to maximize its performance and optimize for risk, donating stock to Rethos can give your holdings the health check they need. Implementing a donation strategy puts your capital gains to work funding your philanthropic objectives. Talk to your advisor about which assets to put to a better use.
You Can Donate Stocks to Rethos Easily
Some people may not be interested in donating stock because they think it will require a lot of paperwork and phone calls, or that Rethos may not be able to easily accept a stock donation. But a direct transfer to Rethos is easy and takes the bother out of donating stock. Download these simple instructions for you to complete your stock transfer quickly and easily.
If you have a donor-advised fund, instead of donating multiple blocks of stock to multiple charities, you make one donation. There is one form to file with your tax return instead of many. You simply designate Rethos as an intended gift recipient and that’s that.
To be eligible for a charitable deduction for 2021, donations of stock must be received by Rethos no later than December 31, 2021. Because different assets take different amounts of time to be transferred, you should initiate your transactions as early as possible. Again, consult your tax or financial professional to determined which path is best for you.
IMPORTANT LEGAL DISCLOSURE
The information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Rethos does not provide legal or tax advice. You should consult your tax advisor to properly determine the tax consequences of making a charitable gift to Rethos: Places Reimagined.