Benefits of donating appreciated assets in 2020

There are many ways to make an impact through philanthropy. Each philanthropist who gives their time, talent or treasure to our community contributes to our region’s health and vitality. This year, as many consider how to combat the devastating effects of the COVID-19 pandemic in our community, some giving strategies are especially impactful.

Changes to tax law and market changes sometimes dictate the most tax-wise gift. An especially impactful way to give this year is through appreciated assets like stocks, mutual funds or ETF's. 

Why appreciated assets?

If you choose to donate an appreciated asset directly, rather than selling the asset in order to make a cash donation, you can claim a tax deduction for the full fair market value of the assets without owing capital gains tax on the sale. Consider donating highly appreciated assets to take advantage of this benefit.

This approach can also mean a greater impact on the organization you would like to support. Shaun Shira, director of major and planned gifts, explains, “In many cases, gifts of highly appreciated stock or mutual funds allow the donor(s) to make a larger gift than they normally would with cash assets. It’s an effective strategy for individuals looking to make a greater impact with their philanthropy.”

Here's a fictional example: a married couple filing jointly in the 32% tax bracket wants to donate stock with a fair market value of $100,000. Their cost basis for this stock is $5,000. If the stock were sold, the couple would pay capital gain taxes of $14,250 and be able to donate the remaining $85,750 to the nonprofit of their choice. If the same stock were given to the nonprofit directly, capital gains taxes are completely escaped, and the organization would receive the full $100,000 gift. Additionally, donating the stock directly results in greater income tax savings for the donor partners, because the value of the gift is greater.

Gifts of appreciated assets can be contributed to an existing fund or used to establish a new fund (like a scholarship or Donor Advised fund) at Grand Rapids Community Foundation. 

Support from a professional advisor simplifies giving

Additional charitable giving benefits for 2020 were also made available through the Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted in March. To navigate the various benefits and ways to make impact, many donor partners work with professional advisors, like attorneys or accountants. A professional advisor can share guidance about specific giving strategies and how they fit with your overall plan. 

The Community Foundation has great partners that can assist in navigating the benefits of donating appreciated assets this year, or taking advantage of benefits made available by the CARES Act. The full list of partners can be found at grfoundation.org/advisors. 

Get started today

The Community Foundation relies on donor partners like you to create a community where access, equity and opportunity exists for everyone who calls West Michigan home. We hope you will consider giving this year and into the future.

To be credited for 2020, gifts must be:

• Cash: Postmarked or given online on December 31
• Stock: DTC eligible securities should be sent by the delivering institution by December 30
• Mutual Funds:
  • Automated Customer Account Transfer (ACAT) System Transfer - As long as the mutual fund is in the ACAT system, the deadline for initiating the transfer is December 30
  • Non-ACAT Transfer - Initiate for shell account generation by December 21

Our team is here to help! We have seen our community use a combination of these strategies, including using highly appreciated securities to group their donations by establishing a donor advised fund. You can reach any member of our development team at 616.454.1751.