What Is A Stock Donation?
A stock donation is when a company provides shares from its stocks as charity. It allows the owner to enjoy tax reductions in the fair amount value. However, this is only done when the charity holds the shares for at least a year.
Accepting stock donations as a gift is a great way to keep your finances up, especially if you run a charity. Most celebrities and businessmen give these stock donations as charity and have now become more of a trend. According to reports, there was a 62% increase in these charities from 2017 to 2018, which reached a total amount of $21 billion. Most of these celebrities gift their stocks as a charity because it helps reduce the tax value on these stocks.
If you are wondering if you should accept stock donations as a gift then, you are right because this is a serious concern. You could land in serious trouble if you accept stock donations for someone when you do not qualify for them. A simple answer is yes, however, there are a few conditions involved in this which we will be discussing in this article. Before we continue about whether you should accept these stocks or not; let us take a look at how these stocks can benefit you?
How Do Stock Donations Help?
Donors get tax benefits and relief when they make stock donations. These donors get a tax deduction for the entire market value. Most of these donations can help donors save around 20% of their tax amounts. These stock owners do not have to pay capital gains on these stocks when they donate them to a nonprofit charity.
It is a great way for these donors to improve their stock portfolio, as well since they get a chance to buy the same stocks at a higher price later on. Therefore, this bonus motivates more people to gift their stocks as donations to charities.
Does Every Charity Qualify for Stock Donations?
Unfortunately, no, every charity does not qualify for a stock donation. There are a set of rules and regulations involved in this that you need to follow if you wish to qualify. Taking charities without this qualifies can be a legal offense. However, if you want to make sure that your organization qualifies for these stock donations, then, there are a few things you need to do.
How Do I Get Ready To Accept Stocks as Charity?
You should start by making a brokerage account. It will be fairly easy since you can find many providers in the market for it. You may also get a lower fee for it if you sign up as a charity account. You should come up with an instruction letter as a PDF next. You can send this letter to donors when you send them emails as it will consist of basic information and contact details.
It is best to work on an investment policy if you want to focus on specific stocks for your charity. You should also come up with a strategy for these stocks because you will have to decide whether you want to sell these stocks immediately or not.
You should also think about hiring a professional for this so that you can monitor your stock donation account daily and see the transactions accordingly. It is best to track all the donations using a CMS or an accounting program. These programs will keep all the necessary records for the donations which will benefit you later on. Finally, if you are sure that you add all these donations to your taxes; then you should accept them because you might land into trouble otherwise.
Should You Pay For A Stock Account?
You might be wondering if you should pay for a stock account for your charity. The answer is, yes you can pay for your stock account but what if we told you that you can get it for free? Yes, that is true. Let us see some of the ways that you can follow to get a free stock charity account.
Ways To Open A Brokerage Account For Free
A brokerage account is the kind of account used to deal with securities such as bonds and shares. You can deposit and transfer these securities like a normal account but these brokerage accounts give you access to the stock market as well. It means that a single account will help you deal in stocks, money, and incentives altogether.
These accounts are also called taxable accounts because the government taxes these accounts as a capital gain. Therefore, these accounts have different taxation and withdrawal rules. It is why most nonprofit organizations go for these brokerage accounts for dealings.
Conclusion
So, as you can see, making stock donations are a great way to keep things afloat, when you are running a nonprofit organization. Ensure that you fulfill the process mentioned in the article and things will flow smoothly.
Sources
https://resources.freewill.com/7-steps-to-set-your-nonprofit-up-for-accepting-gifts-of-stock
