The Friendship Club welcomes your donation of stock, which may afford you additional tax benefits. Below is the information you’ll need to give to your brokerage firm. We’ve also gathered some tips from Kiplinger that might be helpful in making a decision on whether it is better for you to donate stock or cash.
What you need from The Friendship Club to make a donation of stock:
- Vanguard DTC Number: 0062
- TFC Account Number: 52473409
4 Things You Should Know About Giving Stock to Charity
The best strategy depends on whether the stock has increased or decreased in value since you bought it and whether you’ve owned it for more than a year. Here are five things to know about giving stock to charity to get the maximum tax break:
1. Giving appreciated stock you’ve held for more than a year is better than giving cash. If you donate stock that has increased in value since you bought it more than a year ago – and if you itemize deductions — you can take a charitable deduction for the stock’s fair market value on the day you give it away. You’ll also avoid capital-gains taxes on the increase in value over time, which you would have had to pay if you sold the stock then gave the charity the cash proceeds. You can deduct the fair market value only if you hold the stock for more than a year before giving it away. If you’ve held it for less than a year, your deduction is limited to your cost basis — what you paid for the stock — not the current value.
2. If it’s a losing stock, it’s better to sell it and give the cash. If the stock has lost value, it’s better to sell the stock first and give the cash to the charity. You’ll still be able to deduct your charitable donation if you itemize, but you’ll also be able to take a capital loss when you sell the investment.
3. Ask the charity and brokerage firm about the procedure and time frame for giving stock. Most banks and brokerage firms require a letter of instruction or letter of authorization to transfer the shares to charity, and a mutual fund company may have a special form. It’s a good idea to start the process at least a week before December 31, so the transfer has plenty of time to be completed during the holidays. Jane Wilton, general counsel for the New York Community Trust, recommends transferring mutual fund shares a few weeks earlier. “Some mutual fund companies are faster than others,” she says.
4. You can buy extra time with a donor-advised fund. If you’d like to transfer shares when the value reaches a certain level but want extra time to decide which charity to support, you could give the stock to a donor-advised fund. You usually need $5,000 to $10,000 to open a donor-advised fund at a brokerage firm, mutual fund company or community foundation. You can take a charitable deduction when you give the shares to the donor-advised fund, but you have unlimited time to decide which charities to support. The donor-advised fund may also accept privately held stock, real estate and other complex investments. See Donor-Advised Funds: Tax Break Now, Charity Later for more information.
One Other Good Tax Strategy
Donate directly from your IRA. If you are over age 70½, you can transfer up to $100,000 from your IRA to charity tax-free. The gift counts as your Required Minimum Distribution for the year, but it is not included in your adjusted gross income. This can be a great way to avoid having to pay taxes on your RMD if you want to support a charity, and it gives you a tax break even if you don’t itemize your deductions.
To count for the tax break, you must transfer the money directly from your IRA to the charity – you can’t touch it first. You will need to contact your brokerage firm and direct them to make the transfer directly.