Comparing Tax Savings of Stock Donations with Cash Donations

Someone wants to make a $10,000 donation to a non profit organization but is unsure of whether it is worth while to donate cash or stock, this article will compare the effect of the same donation in cash vs. stock and show the benefit of donating stock.

We will assume the donor has a marginal tax basis of 35% and has stock they purchased for $2,000, that is now worth $10,000. That means if the donor sold the shares, they would have $8,000 of gains that they would need to pay taxes on – a 15% tax rate on the long term gains as of the time of this article.   Rather than selling the stock, the donor can donate it and save on taxes.  If the donor does not want to part with their stock or believes it still has room to go up, they can still donate stock and buy it back later as they will get an increase in the cost basis.*

Move Line to Compare Stock Donation vs. Cash Donation
Donating $10,000 Cash
  • Donor will be able to deduct $10,000 from income and save $3,500 on taxes.
  • To get an equivalent tax savings of $4,700 – the donor would have to donate $13,428.57 in cash.
Donating $10,000 in Stocks
  • Donor will still deduct $10,000 from income which is equivalent to $3,500 in tax savings.
  • PLUS – donor will also benefit from not having to pay capital gains tax on the $8,000 of appreciation in value of the stock.
  • This is worth an extra $1,200 in additional savings for a total savings of $4,700.

* This is not tax advise. Please speak with your financial planner or tax professional to make sure your stock donation qualifies for the tax benefits described above. The details of each transaction are different and require professional advise.