October 15, 2021

If you’ve been paying attention these past few years, you know the stock market has continually broken records and reached historic highs. At the same time, the market has welcomed a new generation of investors, entirely new industries, and even new asset classes to the mix (think of Bitcoin and other cryptocurrencies). All of this is terrific news if you have a brokerage account, because you have more investment options than ever before—and you’ve probably seen some excellent profits in the past 5, 10, or 20 years.

But your gains in the market may also have a downside: you will face a hefty tax bill when it’s time to sell.

Luckily, we have more good news for you: by donating your appreciated securities to a charity like Mercy Home (instead of selling them outright), you can avoid capital gains tax completely, and receive a charitable tax deduction as well.

Donating appreciated securities allows your gift to go further, and lowers your tax bill.

This strategy is a winner because it allows you to save taxes twice on a single gift. First, you avoid capital gains tax on donated securities. Second, you can claim a charitable deduction for the full fair-market value of the gift when it’s time to file your taxes.

Plus, your gift will go even further toward the causes you care about most. Because nonprofits like Mercy Home are tax-exempt, we are able to use 100% of your donation to build a brighter future for children in need. Take a look at the chart below to see how this kind of gift can help you and the young people served by Mercy Home.

Below is an example to help you decide if donating appreciated investments is a good option for you. Let’s assume that you’re married and filing jointly, are in the 32% tax bracket, and want to donate $10,000 worth of stock. In this example, a donation of stock allows you to avoid paying capital gains tax, while also receiving a larger itemized deduction.

As you can see, making a charitable gift of stocks, bonds, ETFs, or mutual funds (rather than cash) could increase the value of your donation, grant you a larger tax deduction, and ultimately save you money.

While many veteran investors know and understand the value of a stock donation, many more are new to the market (or are just getting ready to sell after holding for many years). In fact, donating stock instead of cash is a smart tax-planning strategy for just about any type of investor. Whether you’re holding highly appreciated stock from many years ago, shares from a recent IPO that has skyrocketed in the past year or two, or stock options offered from your company, donating securities to charity can be a “win-win” for all involved.

To learn more about how this donation strategy can help you, please contact us at 1-800-378-7200 or plannedgift@mercyhome.org.