Many donors are interested in strategies to amplify the impact of their generosity. One highly effective strategy that often goes overlooked is the donation of appreciated assets. Whether it’s stocks, real estate, or other investments that have grown in value over time, donating these assets can provide substantial benefits both to you and to the causes you care about.

What Are Appreciated Assets?

Appreciated assets are investments that have increased in value since you purchased them. Common examples include stocks, bonds, mutual funds, and real estate. When you sell these assets, you typically incur capital gains tax on the profit. However, by donating these assets directly to a fund at CFHZ, you can avoid the capital gains tax and potentially receive a charitable deduction for the full market value of the asset.

Why Donate Appreciated Assets?

By donating appreciated assets, you can potentially donate more than if you were to sell the asset and donate the after-tax proceeds. This allows you to create a greater impact for the charitable organizations and causes you care about. Many charities, including CFHZ, are equipped to accept donations of appreciated assets, making the process straightforward and efficient. You can make a substantial gift without the hassle of selling the asset yourself.

Consider these examples of donating appreciated assets

• Jane Adams purchased $10,000 worth of stock five years ago and it is now worth $50,000. If Jane were to sell the stock, she would incur capital gains tax on the $40,000 appreciation. Assuming a capital gains tax rate of 20%, she would owe $8,000 in taxes, leaving her with $42,000 to donate. However, by donating the stock directly to CFHZ, Jane avoids the $8,000 capital gains tax. Additionally, she can claim a charitable deduction for the full $50,000, maximizing her tax benefits and enabling her to make a larger gift to support her favorite causes.
• Sally and Bob Jones plan give $100,000 to their donor-advised fund at CFHZ to organize all of their giving for the calendar year. Sally and Bob have a combined adjusted gross income of $600,000, which lands them in the 35% federal income tax bracket. If they gave $100,000 in cash to their donor-advised fund, they could realize an income tax savings, potentially, of $35,000. Instead, Sally and Bob give highly-appreciated, publicly-traded stock, valued currently at $100,000, to their donor-advised fund. They’ve been holding the stock for many years and the shares have a cost basis of $20,000. Not only are Sally and Bob eligible for a potential income tax deduction that will save them up to $35,000, but they have also potentially avoided $12,000 of capital gains tax that they would have owed if they’d sold the stock (using a long-term capital gains tax rate of 15%).
• Jenny and Joe Smith plan to give $1 million to community causes this year. They’ll do that by adding $500,000 to their donor-advised fund at CFHZ, which in turn they will use to support their favorite charities. They’ll also be making a $500,000 gift to an unrestricted fund at CFHZ to help address the region’s greatest needs for generations to come. Jenny and Joe are in the highest federal income tax bracket because they earn multiple seven figures. If they give $1 million in cash, they could save up to $370,000 in income tax. If they give publicly-traded stock instead of cash, assuming a $200,000 cost basis in stock valued currently at $1 million, they would still potentially save up to $370,000 in income tax, and they would also potentially avoid $160,000 in capital gains tax (based on a long-term capital gains tax rate of 20%).

Donating appreciated assets is a powerful way to enhance your philanthropic impact while enjoying significant tax benefits. CFHZ is here to help you navigate this process and ensure that your generosity goes as far as possible. By leveraging appreciated assets, you can make a more substantial contribution to the causes you care about and achieve your philanthropic goals more effectively.

We always encourage donors to first seek the advice of their legal, financial, or tax advisors when considering a gift of non-cash assets. While our team does not offer tax advice, we stay knowledgeable on charitable giving strategies. Please contact Colleen Hill, Vice President of Development & Donor Services, at chill@cfhz.org or by calling 616–994–8853 if we can help you serve your clients.