Missing the Value of Stock Gifts
For many donors, the largest charitable opportunity is already sitting in their investment portfolio.
Over the past three years, the stock market has rewarded many long-term investors. Companies such as Walmart and Costco have seen significant increases in their stock prices, while many investors also hold appreciated shares through mutual funds or index funds. As a result, many donors own investments that have grown substantially in value. Check out these examples.
Walmart 1000 shares value in July 2023 - $51,570 (today worth $394,250)
Costco 1000 shares value in July 2023 - $561,350 (today worth $938,100)
Rather than selling the stock, paying capital gains tax, and donating cash, the donor could transfer a portion of the appreciated shares directly to charity. The nonprofit receives the full value of the gift, and the donor may avoid capital gains tax while receiving a charitable deduction. Yet when it comes time to support a favorite charity, they often write a check. That is one of the biggest missed opportunities in charitable giving today.
Giving appreciated stock that has been owned for more than one year is one of the most tax efficient ways to make a gift. Instead of selling the shares, paying capital gains tax, and donating the cash that remains, donors can transfer the stock directly to a nonprofit. In many cases, they receive a charitable income tax deduction for the full fair market value while avoiding capital gains tax on the appreciation. The result is often a larger gift at a lower after tax cost.
The nonprofit benefits as well. Because charities generally do not pay capital gains tax when they sell donated securities, they receive the full value of the gift. A donor who contributes $25,000 of appreciated stock gives the organization access to the entire $25,000. That means more dollars are available for scholarships, patient care, research, programs, or other mission driven work.
This approach also works well for donors whose portfolios have become heavily weighted toward one successful investment. A charitable gift of appreciated stock allows them to reduce that position while supporting a cause they care about. It is one of the rare opportunities where sound financial planning and charitable giving work together.
Retirees should also remember Qualified Charitable Distributions, or QCDs. Individuals age 70½ and older can make gifts directly from an IRA to qualified charities. For those taking Required Minimum Distributions, a QCD can satisfy all or part of that requirement while keeping the distribution out of taxable income. It is a simple strategy that often produces meaningful tax savings.
The most important point has little to do with taxes.
Most donors never think about giving stock. They simply continue writing checks because no one has suggested another option. The same is true for QCDs. Unless someone asks the question, many donors will never know these giving methods exist.
That is why gift officers and nonprofit leaders have an important responsibility. They should regularly ask, "Have you ever considered making your gift with appreciated stock?" or "If you have an IRA, have you looked at making a Qualified Charitable Distribution?"
These conversations are not about increasing pressure on donors. They are about helping donors make smarter gifts. When nonprofits take the initiative to explain these options, donors often discover they can give more, save taxes, and create greater impact than they thought possible.
