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Donate Appreciated Assets for a Double Tax Advantage

Rarely do we find in our tax code a way for individuals to get a double tax benefit in one transaction. By donating appreciated assets to a qualified charitable organization taxpayers can take advantage of one of these double benefits. The donated asset avoids capital gain taxes and you get a charitable contribution deduction.

For example, if you have a stock that you purchased for $1,000 that is now worth $1,500, normally you would sell the stock and realize a capital gain for $500 on your tax return. The money can then be used for any of your other activities. However, if you plan on making a charitable donation, handing the stock over to the organization avoids having the $500 gain hit your tax return. In addition, you get a charitable contribution write off of $1,500. This shelters $2,000 from being subject to tax!

Some things to consider when donating assets like stocks. First, never donate a depreciated asset. If the asset has lost money, it is better for you to realize the loss on your tax return and then give the cash to the charity. Second, charitable deductions are itemized deductions. Make sure you are itemizing on your tax return and not taking the standard deduction. Third, you must have held the asset for at least a year. Any shorter period does not qualify for this special treatment. Last, be mindful of phase outs. If your income is greater than $250,000 for singles and $300,000 for married couples, deductions will begin phasing out for you.

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January 8, 2016

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