As we get into the holiday season, in addition to celebrating and gathering with family, it’s also a great time to reflect on all we’ve been given. Hopefully, you’ll see the abundance in our lives (namely, our clients have food, shelter, clothing, and enjoy relative peace in our country). If you decide to share some of that abundance with others, gifting stock can be a very tax advantageous way to do that. Let me show you an example!

Let’s pretend that Jim and Susy Sample have a $500,000 taxable account. Some of the stocks in their portfolio were bought many years ago and have over 100% gain (i.e. they bought the stock for $100 and now it’s trading for $200). They are in the 30% marginal tax bracket (federal and state taxes). If Jim and Susy Sample want to give $10,000 to their favorite charity, they can do this two ways:

  1. Gift in cash. Jim and Susy would get a $10,000 tax deduction (if they itemize on their taxes) and save 10k x 30% = $3,000 in taxes!
  2. Gift $10,000 worth of stock. In our example, the cost basis of this stock is $5,000 and it’s worth $10,000. By gifting stock, they still get a $10,000 deduction on their taxes (if they itemize) AND they get to avoid the $5,000 capital gain which saves them $5,000 x 15% = $750. Their total tax savings are $10k x 30% = $3,000 PLUS $750 = $3750.

If you have questions about stock gifting or want to discuss the pros and cons of such a giving strategy, please reach out to us! We are here to help!

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