Instead of writing checks, use appreciated securities to fulfill year-end charitable obligations. Suppose you generally give $1,000 to your alma mater. If you write a check, you’re out $1,000.
Instead, give away $1,000 worth of stock that you bought for, say, $400. Considering the $600 unrealized gain and the $120 tax obligation (at a 20% rate) you’d have if you sold, this stock is really worth only $880 to you. Yet if you give it as a charitable contribution, you get the same tax deduction as you would by writing a $1,000 check. The charity, in turn, can sell the stock for the full $1,000 without owing any tax. It’s not difficult to implement this strategy.
- Call the charity and get its brokerage account number.
- Call your own broker or your mutual fund company and explain what you want to do, providing the account number.
- Follow up by fax or phone to confirm the transaction.
