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The Advantages of Donating Appreciated Securities
Donating appreciated securities, just like giving cash, will support your interests at UIC. But, giving appreciated securities instead of cash will save you more tax dollars.
An appreciated security is any stock, bond or mutual fund that has increased in value since purchased. Following are some advantages of donating appreciated securities:
- Earn a charitable gift income tax deduction equal to the market value of the donated shares, as long as you have owned them for at least one year
- Save capital gain taxes, which you would have owed when you sold the shares
- Increase your tax basis in the security you donate by re-purchasing it with the cash you would have given at current market value.
Benefits of giving appreciated securities vs. cash
It will cost you less to donate appreciated securities. See this illustrated in the scenario below.
| GIFT OF CASH | GIFT OF STOCK | |
| GIFT | ||
| Cash amount and current market value of stock | $10,000 | $10,000 |
| Cost basis of stock (donor's investment in the shares) | -$2,500 | |
| Unrealized capital gain | $7,500 | |
| TAX SAVINGS | ||
| Income tax (35%) | $3,500 | $3,500 |
| Capital gain tax (15%) | $0 | $1,125 |
| Total tax savings | $3,500 | $4,625 |
| AFTER-TAX COST OF GIFT | ||
| Original gift amount | $10,500 | $10,500 |
| Less total tax savings | $3,500 | $4,625 |
| $6,500 | $5,375 | |
You can donate stock you intended to own for a long time, then use cash to replace the donated shares. You will maintain market value in the stock and increase the cost basis from $2,500 to $10,000.
Choosing the best securities to give
The best capital gain tax savings come from donating shares with the largest percentage increase in value over their cost basis. See this illlustrated here.
How to arrange an appreciated securities donation
- Confer with your income tax advisor and choose which appreciated securities are best to donate given your tax and financial circumstances
- Contact your stock broker or mutual fund company to issue written instructions for them to donate the chosen securities
- Ask your stock broker or mutual fund account representative to contact Lynn Bennett, our gift planning advisor (see contact information below), for our electronic securities transfer information
How to receive income from an appreciated securities donation
If you are over 60, you can donate appreciated securities in exchange for a charitable gift annuity, which will pay you income for the rest of your life. Learn more about charitable gift annuities.
For More Information
UIC's Gift Planning Advisor, Lynn Bennett, is available to answer questions and offer guidance. Please contact her at 312-413-3394 begin_of_the_skype_highlighting 312-413-3394 end_of_the_skype_highlighting or lbennett@uif.uillinois.edu to:
- Ask questions or discuss your specific interests.
- Request additional information about appreciated securities.
- Schedule a confidential consultation to help you determine your best gift planning strategy.