Cash or Stock? A Guide from HCR Wealth Advisors on Your Holiday Donations

HCR WEALTH ADVISORThe end of the year is rapidly approaching, and the holiday season is upon us. Giving back to the community is always a great idea and it can be tough to decide between stock and cash donations. The experienced wealth managers at HCR Wealth Advisors can provide the information needed to make the wisest decision possible.

This helpful guide is here to take all of the guesswork out of this decision once and for all. Stock is the way to go in most instances and these are the reasons why:

Tax Deductions

Itemizing deductions is key in these instances. Tax laws have changed, and HCR Wealth Advisors is here to help. Standard deductions have increased as well. Donating stock to local and national charities is the preferred choice for those who are looking to maximize tax deductions. As long as the stock donation is limited to 30 percent of the donor’s adjusted gross income, they are able to enjoy the desired tax deductions.

Tax Liability Removal

Wait for stock to reach its highest possible level of appreciation before donating. This allows for the removal of certain tax liabilities. Capital gains taxes can reach 20% on the federal level and nearly 4% on the state level. Those who do not donate wisely could incur these expenses in full.

Use Cash in A Wiser Manner

Cash donations are not always recommended but those who are looking to utilize their capital wisely should donate stock first before replacing it with cash. Looking to hold onto the stock that is slated to be donated? Purchase it at a higher cost basis first. This decreases tax liability and keeps the client from using cash in a manner that would be considered unwise.

Bigger Gifts

Of course, that is what the holiday season is all about. Selling stock to raise cash for a charitable donation sounds good on paper but in reality? It decreases the size of the potential donation and increases potential tax liability. A direct stock donation provides a sizable tax deduction and allows the donor to avoid capital gains tax.

This article is provided for informational purposes only and should not be interpreted as investment advice.