Maximizing The Impact Of Your Stock Donations

2 Minute Read
Posted by Overflow Team on July 21, 2023

Tags: Investing

Maximizing The Impact Of Your Stock Donations On Charitable Organizations

If a donor has already made the effort to make a donation to a charitable organization, they will want to know that their contribution is making a positive impact on that charity and the causes it supports. Stock donations are a way for charitable organizations to reap the full benefits of the generous donations they receive.

Giving More

Stock donations allow you to make a bigger donation than if you were to simply give a cash donation. Once you have held stock for over a year and its price has increased, when you choose to donate it, you get a tax deduction that is equal to the fair market value of the stock. 

When you make a gift of appreciated securities held long-term, the donation and deduction are greater than they would be if you sold the shares and donated the cash instead, because you don’t have to pay the capital gains tax. 

Timing Is Everything

Most donors will think about giving stocks to charity towards the end of the year. Although charities will be grateful to accept stock donations at the end of the year, funding needs across organizations can vary, and stock donations may have a bigger impact on charitable organizations if they are made earlier in the year. 

Making The Most Of Donor-Advised Funds

A donor-advised fund (DAF) is a private fund overseen by a third party, used to manage funds used for philanthropy on behalf of an organization or an individual.  By using a DAF, donors can make one stock transfer from a brokerage into the fund. The provider managing the account liquidates the stock, giving the donor a range of charitable resources to donate.

A DAF also allows a donor to leverage the market on the other side of the gift. The funds in a DAF can be invested in several ways like managed funds, index funds, and even with alternative investments, depending on the provider. Being able to invest lets the donor give away more than the initial donation. 

The Long-Term Benefits Of Giving Stocks To Charity 

Giving stock to charity comes with some great long-term benefits for both the donor and the charity. We’ve already seen how stock donations increase the impact of philanthropic contributions by allowing donors to give more. This also has an impact on charitable organizations as they receive a larger contribution, allowing them to do even more good work. 

Stock donations are also a way for donors to rebalance their stock portfolios. If investments’ gains and losses need rebalancing in order to maximize the performance of their portfolios and manage risk, giving stock to charity is a mechanism to do this. 

In Conclusion

Giving stock to a charity is increasing in popularity, and with the benefits on offer for charities and donors alike, you can see why. Being able to donate more to worthy causes will no doubt see stock donations increase even further.