Why Donate Stocks to Nonprofits Directly?
Donating stocks directly to nonprofits allows donors to give more, make a bigger impact, and save money all at the same time.
Many donors own and want to own stock as an asset of their wealth. Research has shown that 80% of affluent and high network individuals own appreciated assets, such as stocks, mutual funds, or bonds, but only 21% of those donors have contributed these types of assets to charity. It is one of the most untapped opportunities for both donors and nonprofits.
However, the number is rising very quickly with over 50% of all charitable donations coming from non-cash assets between 2017 to 2020. Firstly, due to the stock market growing at a steady pace over the last couple of years, even despite fluctuations in the market. Secondly, because many tax-savvy donors have learned that stock donations are the most tax efficient way to give whilst maximizing the donation.
The most successful nonprofits have captured this opportunity by educating donors and providing the technology to make stock donations, frictionless.
Donating stocks directly to nonprofits allows donors to give more, make a bigger impact, and save money all at the same time!
How does stock donations work for a Donor?
Meet Alex, a Designer at Apple.
He wants to make an impact beyond his day job and has been recently compelled by initiatives within his local church to do what he can to fight social injustice. He has recognized how fortunate he has been in his career and wants to give back.
Alex could make a donation the standard way: donate $10,000 in cash to a nonprofit directly.
Alternatively, he could try a different form of donations. He could donate from his stock portfolio (thank you for Apple stock grants!) where he will benefit from significant tax savings.
Let’s compare two options from Alex’s stock portfolio.
Alex has two options:
1). First sell his stock and then donate the cash to a nonprofit organization.
2). Donate his stocks directly to the nonprofit organisation.
If he were to first liquidate and then donate his stock, this would mean his donation would be taxed by up to 37% by the government through the capital gains tax. A capital gains tax is a tax on the profit made from the sale of a non-cash asset like stock. But by donating the stock directly Alex is able to minimize his capital gains tax and maximise the value of the donation to the nonprofit.
To summarize, donating stocks directly for Alex means:
- A larger donation because capital gains are protected, which means Alex has a bigger impact with his donation.
- A higher tax deduction because of the larger donation, which means more tax savings for Alex.
Thereby creating a win-win situation for both the nonprofit and the donor!
In this example, $1,850 was the specific additional value here. For many nonprofits, this is a game changer.
New Story could use $1,850 to pay the rent for a family facing eviction during COVID-19.
StreetCode Academy could use $1,850 to buy a laptop with internet & coding courses for 3 Black & Latinx students who don't currently have access.
So why don’t people currently donate this way? The process is too manual with the necessity for donors to print out forms and send them through the mail to their brokers. With technology advancements, such as Paypal, Stripe and Cash & Credit it has made financial transactions instantaneous and so much easier.
Donors don’t want to have to call or message their brokerage, fill out physical forms, fax in paperwork, and try to contact the nonprofit for their DTC information. It’s time for the donation process to evolve into the 21st century!
Making a donation through stocks is possible for anyone. Tens of billions in value is transacted each year through direct stock-based donations already. But it’s concentrated and limited to high-net worth households with financial advisors who handle these transactions for them.
That changes now. With Overflow you can give some of your stock today in just under two minutes.
Who should use Overflow?
We are calling all tech employees with RSUs, business professionals with employee stocks, and the general public invested in the market i.e. ETFs to consider sharing your shares.
The future that we will create is one with equity!
We call it: Equity For The Inequitable.