Benefits of Donating Stock to Charity and How: A Smart Way to Give Back

5 Min Read

Dec 30, 2024

When it comes to giving back to causes that matter to us, there are many ways to contribute—cash, goods, or even your time. However, one often overlooked method of charitable giving is donating stocks. Donating stock can offer financial benefits for you as the donor and will make a significant impact on the charity. Whether you're looking to reduce your taxable income or make a more substantial contribution without impacting your cash flow, donating stocks to a charity can be an excellent choice.

In this blog post, we'll explore the benefits of donating stock to charity and show how you can support charities like Set Free, an organization dedicated to ending child slavery, providing clean water and crucial medical aid in the name of Jesus through your charitable gifts.

1. Tax Benefits: Save on Capital Gains Tax

One of the most attractive benefits of donating stocks directly to charity is the potential tax savings. When you donate appreciated securities that you’ve held for more than a year, you avoid paying capital gains tax on the increase in value. This means you can give the full appreciated amount to the charity without losing a portion of your gift to taxes.

For example, if you purchased stock for $5,000 and it’s now worth $10,000, donating it directly to a charity allows you to avoid paying taxes on the $5,000 gain. Additionally, you can typically claim a charitable deduction for the full market value of the stock at the time of the donation (up to certain limits based on your income).

This makes donating stock a win-win situation: the charity gets a larger gift, and you save money on taxes.

2. Increased Contribution Without Reducing Your Cash Flow

Donating appreciated stock allows you to make a more significant contribution to your chosen cause without depleting your cash reserves. Instead of writing a check or pulling money from savings, you can donate assets that have appreciated in value. This allows you to support a charity like Set Free at an even higher level, without impacting your day-to-day financial situation.

3. Supporting a Case You Care About

When choosing which charity to donate your stocks to, it’s important to select an organization whose mission resonates with your values. Take Set Free, who is committed to providing freedom through Christ by working to end child slavery and providing clean water and critical medical aid to villages in need across India and West Africa. Your donation of stocks can directly support these efforts, helping them provide life-changing assistance to individuals in need.

By donating stock to Set Free, you’re enabling us to continue this vital work. The financial stability that a gift of appreciated securities can provide will enable Set Free to expand its outreach and programs, ensuring that its mission to bring freedom can continue.

How to Donate Stock to Charity: The Step-by-Step Process

Donating stock to charity might sound complicated, but the process is straightforward. Here’s how you can do it:

Step 1: Check with Your Charity
Not all charities are equipped to accept stock donations, so start by confirming with your chosen charity. Most well-established nonprofits will have a process in place to handle these kinds of donations.
Step 2: Contact Your Brokerage or Financial Institution
Once you've chosen your charity, contact the charities office to get the transfer process started. The charity will provide you or your broker with the information needed to initiate the transfer.
Step 3: Determine the Number and Type of Shares
You’ll need to decide which stocks you’d like to donate and how many shares. Be mindful of the types of stocks you own—some may have restrictions on transfers. The value of your donation will be based on the market price at the time of the transfer.
Step 4: Complete the Transfer
Your brokerage firm will typically handle the logistics of transferring the stocks. You'll need to fill out any forms they require to make the donation official.
Step 5: Obtain a Receipt
Once the donation is processed, the charity will issue a receipt acknowledging your gift. This is important for tax purposes.
Step 6: Enjoy the Benefits
After your donation is complete, you can enjoy the tax benefits, including the charitable deduction and the avoidance of capital gains tax. You’ve made a significant contribution to a worthy cause!

The Long-Term Impact

In addition to the immediate benefits for you and the charity, donating stock can have a lasting impact. With the increased financial support, charities like Set Free can impact more lives than ever before, meeting the needs of those that are suffering. Your donation helps to create sustainable change by providing resources that will continue to support the organization's long-term mission.

And for you, donating stock helps to reduce the taxable value of your estate. By donating appreciated assets, you’re lowering the overall value of your estate, which could potentially reduce estate taxes in the future.

Donating appreciated stock to charity is a powerful way to give back to causes you care about while taking advantage of tax benefits. Set Free is just one example of countless charities doing impactful work that you can support.

If you’ve been considering how you can make a bigger impact in your charitable giving, donating appreciated stock might just be the solution you’ve been looking for. Get started by emailing us at [email protected].