Tax-Wise Giving Strategies, Part 2 – Gifting Appreciated Investments

In part 2 of this series, I discuss how gifting appreciated investments is a great way to give more to charities in a tax-deductible way, while also benefiting from avoiding the capital gains tax and diversifying your investments.  

Gifting Appreciated Investments - You can gift investments that you own that have gone up in value directly to a charity. When you make the gift, you deduct the value of the investment without having to sell it for a gain. The charity then receives it in their investment account and can sell it without a gain because they are a non-profit organization.  

Example: Bob and Jane gift $5,000 of a mutual fund they own that they paid only $1,500 for. They deduct $5,000 and avoid any taxes that would have been owed on the $3,500 gain when they eventually sold it. They then take the $5,000 in cash that they would have given to charity and put it back into their investment account to replace the stock they gifted but at a higher tax cost-basis.  

Donor-Advised Fund (DAF) - You may want to gift large amounts of stock now and then distribute to charities over time. With a DAF, you can make tax-deductible contributions into the DAF and then make regular gifts out of the DAF whenever you want. In the example below, Bob and Jane contribute $15,000 of a mutual fund into the DAF in 2022, deduct it entirely in 2022, and then make gifts of $5,000 in 2022, 2023, and 2024.

Gifting appreciated investments is a great way to get a double tax benefit – one for the donation, and two for the avoidance of the capital gains tax! 

Thank you for reading, 

Alex 

This blog post is not advice. Please read disclaimers.