Part of TFE’s mission is to keep you informed about topics that impact the financial health of parishes and ministries of the Diocese of Milwaukee. As Christmas approaches and thoughts turn to gift-giving, many choose to celebrate the season by giving charitable gifts to the churches, ministries, and nonprofits that do God’s work in the world. Cash gifts are always welcome, of course, but another option is giving a gift of stock.
Benefits of Giving Stock
Both gifts of cash and gifts of stock, given before the end of the year, can reduce the amount of tax you will owe next April. But a gift of stock may save you more than a cash gift. Why? Because when you donate stock that has risen in value over the years, you do not have to pay capital gains taxes on the increase. That means you reduce your taxes in two ways from the same charitable gift:
- When you donate stocks or other securities you’ve owned for more than one year, you are able to claim the current value of the stock as a deduction on your taxes. Assuming you are itemizing your deductions rather than taking the standard deduction, this will reduce your income tax.
- Neither you nor the nonprofit will have to pay capital gains tax on the amount the stock has increased. Capital gains tax can be as high as 20% for some taxpayers.
Let’s look at a simple example. Jim bought $1,000 worth of stock years ago, and its value has risen to $10,000. That is a $9,000 increase in value. If he sells the stock and donates $10,000 by check to his parish, he will have to pay 15%* of the $9,000—$1,350—in capital gains taxes. But if he donates the stock before the end of 2018, not only will he be able to claim a $10,000 charitable gift deduction on his income taxes when April rolls around, neither he nor his parish will ever have to pay the 15% capital gains tax.
Now, let’s consider a slightly more complicated example. Maggie has $10,000 in the bank and she intends to give this to her parish’s capital campaign. Like Jim, she bought $1,000 worth of stock years ago, and its value has also risen to $10,000. Rather than give the $10,000 she has in the bank, Maggie could choose to donate her $10,000 worth of stock. There’s just one snag. Maggie really likes this stock and wants to keep it. Her financial advisor solves the problem: She can donate the stock, then take the $10,000 she has saved in the bank and purchase that amount of the same stock. Now, she will never have to pay the $1,350 capital gains tax on that $9,000, but she still owns $10,000 of her favorite stock.
*Note: Capital gains tax depends on income and filing status, and can be 0%, 15%, or 20%.
How Can Trustees of Funds & Endowments Help?
For information on whether donating stock is the right choice for your financial situation, TFE recommends you consult with your tax, accounting, or financial professional. If you decide that giving a gift of stock is the right choice, TFE can assist you in making the gift. TFE maintains a brokerage account at Charles Schwab that is available for parishes, organizations, or individuals within the Diocese of Milwaukee to complete the sale of donated securities at a very low cost (just a few dollars). Once the securities are transferred into the account, TFE sells them and transmits the net proceeds to the designated parish or organization.
Please note that brokers will be very busy at the end of the year, and brokers and the stock market close down for a few days around Christmas and New Year’s. To make sure your stock makes it to TFE before the end of 2018, we suggest you start the transfer process by December 15. Instructions for gifting securities can be found here.
To discuss this and other ways to benefit your parish or other Episcopal ministry, TFE’s Executive Director, Jill Heller, can be reached at (262) 902–5901 or by email at firstname.lastname@example.org.