Are you planning on making a year-end charitable donation to the Princeton HealthCare System Foundation and wondering whether to write a check or to gift assets? Consider a gift of appreciated stock! You can take the cash you planned on giving and replace the stock you donated at a higher cost basis. When you make your donation of appreciated stock, you can deduct the value of the contribution from your taxable income, and in turn reduce your tax bill, while avoiding the capital gains tax you would owe by selling the security. The higher your marginal tax rate, the greater the tax savings will be.
Quantifying the Benefits
For someone in the top (39.6%) federal tax bracket, deducting the value of a $10,000 cash gift to a public charity reduces federal income tax owed by $3,960. That reduces the effective cost of the gift to $6,040. In states with income tax, the effective cost may be lower. Gifts of appreciated stock or other assets not only reduce tax on ordinary income, but they can also reduce or eliminate tax on capital gains. The additional tax savings can be enormous.
Someone in the top bracket who gives $10,000 in stock that he or she acquired at zero cost basis can avoid paying the 23.8% tax on the stock's $10,000 gain. The extra tax savings would cut the effective cost of the donation to $3,660. A table that shows these savings can be viewed at www.princetonhcs.org/foundationStock.
Limitations
To receive a deduction for the fair market value of a capital asset, it must be held for more than one year. The tax code permits charitable deductions of up to 50% of adjusted gross income (AGI) in the year of a cash gift, and up to 30% in the year of a gift of appreciated stock. However, the deduction can be carried forward for five years. Deferring a deduction is valuable if a taxpayer wants to give more than he or she can deduct in one year, perhaps to help a charity get a matching grant.
For more information on gifts of appreciated stock, to request that a brochure be mailed/emailed to you, or to make a gift, please
visit us at www.princetonhcs.giftplans.org, or call 609.252.8710 today!
Article as seen in Foundation News Winter 2014.