When you make year-end charitable donations, give appreciated securities instead of cash. As long as you’ve held the securities for a year or longer, you’ll get a deduction for the full market price. This eliminates paying tax on capital gains and allows you hold onto your after-tax cash in the bank.
To implement this strategy, call the charity and get its brokerage account number. Then call your own broker or your mutual fund company and explain what you want to do, providing the charity’s account number. Follow up by fax or phone to confirm the transaction.
If you’re making two dozen contributions to various charities you might not want to go through all the paperwork. Instead, contribute your appreciated securities to a donor-advised fund. Such funds are offered by the likes of Fidelity, Vanguard, and Schwab as well as by many local community foundations. You might contribute, say, $5,000 worth of appreciated securities and get a full write-off for this year. Then you can take your time about notifying the fund and identifying gifts you’d like to make from your $5,000 account to various charities.