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Feel Appreciated by Your Assets

Posted on December 6, 2022
Golden piggy bank

The end of another calendar year is quickly approaching! As you think about your year-end charitable giving, consider this: one of the most mutually beneficial and tax-smart ways to support a qualified charity, like Drexel University or the College of Medicine, is to give shares of appreciated stock or mutual funds instead of cash. You can deduct the shares' current fair market value as a charitable gift and avoid paying tax on the capital gain. Drexel will sell the shares and use the funds to support whichever program or department that you designate.

Giving stock is better than giving cash.

Here’s an example: You have 200 shares of XYZ stock that is currently worth $50 per share ($10,000) and you paid only $5 per share ($1,000) when you purchased it several years ago.

  • If you sell the stock and then donate it to a qualified charity, like Drexel University, you’ll pay capital gains tax on the difference between what you paid for the stock and its current value. Capital gains rates for 2020 range from 0% to 20%, depending upon your taxable income and filing status. If the 15% rate applies to you, you'll pay $1,350 in capital gains tax, leaving you $8,650 to contribute to Drexel.
  • If you donate the shares directly to Drexel University, you’ll have no capital gains tax due, you’ll qualify for an income tax deduction for the full current value amount of $10,000 and Drexel will receive the full $10,000.

There are a few rules to remember:

  • You must have owned the stock or mutual funds for more than a year. Otherwise, you only get to deduct the basis, not the current fair market value.
  • The value of the contribution is the average of the high and low prices for publicly held securities on the day of transfer.
  • The deduction is limited to 30% of your adjusted gross income (AGI). This differs from a 60% limit for donations of cash, but you can still give mixed donations (cash and appreciated assets) to maximize your deduction, and the amount that you can’t use in the current year can be carried forward to be used in future years.

Questions? To learn more about tax advantageous charitable giving, contact David Toll, senior associate vice president for gift planning, at (215) 895-1882 or giftplanning@drexel.edu.

Posted in Tax Smart Giving, Other Ways to Give

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