Net Cost of Charitable donation of appreciated stocks

Not A Clue · 2017-11-07T16:00:56+00:00

As I understand it: When an appreciated stock (any assets?) is donated to a charitable org., there is no gains to be reported and the donor also get a deduction of the FMV of the stock donated. Let's say I donated a stock with a FMV of $135 with a cost basis of $35; and I have ordinary taxable income of $1,000. My LTGC is taxed @ 30% (FED + Local); and my ordinary income taxed @ 35%. Based on the above assumptions: 1. If I simply sell the stock, my taxes would be $350 on ordinary income + $30 on LTCG -- for a total tax of $380 and a net after tax income of $720. 2. If I donate the stock, my taxes would be $302.75 (35% x (1,000-135)) -- net after tax income = $697.25 2. Net cost of donation is $22.75 (OR $100 - $77.25 in lower taxes) In broad magnitude, am I doing this correctly? (I know $1K income doesn't get me to the 35% tax bracket. But my overall income does not impact on the calculation -- just the marginal tax rates. And you can calc. the tax savings as $135 x 35% + $30 tax on LTCG = $77.25) In terms of FMV, is that the closing price on the day the stock leaves my account? What if the stock arrives at the destination on the following day? What is the limit for deduction of charitable donation of appreciated property? 50% of my AGI? Anything else that I should be aware of? TIA

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Not A Clue 8 years ago

Thanks for the spreadsheet.

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N

Not A Clue 8 years ago

Thanks for the detail explanation.

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Taxed and Spent 8 years ago

All I did was share the link. :)

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T

taruss 8 years ago

Let's take another look at the scenarios with some more calculations, which unfortunately don't all fit on one line. This looks at these cases: 1. You don't do anything. 2. You sell the stock and keep proceeds. 3. You sell the stock and give proceeds to charity. 4. You give the appreciated stock to charity. I calculate the tax as you suggest and then look at the change to your wealth and what the charity gets. In calculating your wealth, I include the unrealized tax as well.

35% 30% Cash Capital Case Income Sale Deduction Tax 1 1000 0 0 -350.00 2 1000 100 0 -380.00 3 1000 100 135 -332.75 4 1000 0 135 -302.75

Unrealized Wealth + Case Asset Basis Tax 30% Wealth Charity Delta Charity Delta

1 135 35 -30 755.00 0 0.00 755.00 0.00 2 135 135 0 755.00 0 0.00 755.00 0.00 3 0 0 0 667.25 135 -87.75 802.25 47.25 4 0 0 0 697.25 135 -57.75 832.25 77.25

So, the difference in your wealth between 3 & 4 is $30 more in your pocket, but it still costs $58 to you. But the charity gets $135. The final delta is the net transfer of money from the government to the charity from the charitable deduction.

Case 4 is better than case 3 for you, but worse for the government. The charity comes out the same in either.

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Net Cost of Charitable donation of appreciated stocks

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