Why You Should Consider Donating Stocks to Charity

In this segment of “Financial Planning Q&A” on Motley Fool Live, recorded on Dec. 1, Fool contributor Dan Caplinger explains the process of giving stock to a charitable organization.

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Dan Caplinger: It’s something that would be above and beyond what a lot of Fools do near year-end, which is to make gifts of appreciated stock. Now, those gifts will not qualify for this $600 additional deal. But if you are making charitable gifts, whether or not you care about the tax deduction, using appreciated stock to do so can make a lot of sense.

When you give a stock to charity, you get to deduct, if you itemize, the full market value of that stock. However, you do not have to pay capital gains on the stock, and in addition, the charity can take your stocks, sell it. They don’t have to pay any tax on those gains either because they’re going to be a tax-exempt entity, the IRS doesn’t charge a tax bill for that.

That can be a win-win for everybody. It gives you the ability to make use of the stocks that have gone up in value and you’re good with them in a way that ends up saving you and taxes as well. The charity gets a bigger potential income as well, and so it’s something that is a win.

In a year, 2021, maybe not quite the huge boondoggle that 2020 turned out to be, but markets are still up 20 percent or more. It’s been a good year for a lot of Fools with certain individual stocks as well, and so if you’re interested in giving back a little bit of that, then giving stock can be a great way to do that.

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