Charitable donations are a good thing to do all the way around as it helps those in need. You get a reward of sorts when you donate as the donations themselves are tax-deductible every April when you do your taxes. This article will look at two types of donations that you can do, cash donations and stock donations.
Cash donations are the most popular donations that people do every year. There are many places that accept cash donations with a special nod to organizations like Goodwill in this capacity. Those organizations often can take physical donations (clothes, items, etc.) and you write down the cash value of those donations and use that receipt on your tax return when you tally them up.
Donations of stock are not as commonly used and frankly, this method of donation should pick up more steam as there are inherent advantages to this donation method. Stock donations are tax-deductible just like their cash counterparts but there are unique benefits to stock donation that you can’t get in cash donations.
Selling Stock vs. Donating Stock
A good example of the advantages lies in how you remove a stock from your portfolio. Most people end up selling the stock and keeping the proceeds. The problem with that scenario is that you end up being taxed on the income you made from the sale on top of the Federal and State capital gain taxes that may be levied on the proceeds of the sale.
If you have a stock that you’ve made money on and want to get rid of the stock, you can donate the stock instead of selling it, as the donation absolves you of any tax liability on that stock. This kills two birds with one stone, you’ve made a tax-deductible charitable donation and you’ve also lowered your tax burden at the same time.
HCR Wealth Advisors
For great tips like this and others, look to HCR Wealth Advisors. HCR has provided great wealth management services for over 30 years.
This article is provided for informational purposes only and should not be interpreted as investment advice.