Donating Stocks to Charities

There are a lot of ways to donate money to charitable causes, but one that often gets overlooked is donating stocks. While donating cash is generally the most efficient way to give to an organization, by donating an appreciated stock, you give the organization the opportunity to sell that stock and add the resulting cash directly to their coffers, which generally allows them (and you) to avoid paying taxes on that money.

In essence, this is a way for people who own stocks that have appreciated to reduce their taxes on them. Sure, it’s not the noblest reason to donate them, but whatever works. Frankly, it doesn’t matter why somebody donates to a nonprofit, so long as that donation isn’t illegally obtained. And donating makes people feel good, so even the smallest donations are still at least a little bit driven by personal benefit.

The difference between selling a stock, paying the taxes on it, and donating the remainder versus just donating the stock isn’t all that great, but it does result in more money for the charitable organization (provided the stock in question doesn’t end up dropping in value, but it’s still money that the organization didn’t have in the first place). So if you happen to own appreciated stocks, and you were thinking of selling some of them off in order to make a donation to a specific group, donate the stock instead.

There are a few things to check first, namely that the stock has appreciated, because otherwise you are better off selling it first. But you also need to make sure that the organization to which you donate the stock is qualified by the IRS, which is easy enough to find out by looking them up on the IRS website. An unqualified organization isn’t going to be able to avoid paying taxes on that stock.