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What are the IRS rules for making a Stock Donation?

By June 21, 2012 October 3rd, 2019 No Comments

Here are the IRS rules for making a Stock Donation:

1

Select a qualified recipient.

If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations or candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
2

Itemize deduction and fill out Form 8283

To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If your total deduction for all non-cash contributions for the year is more than $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
3

Deduct any benefits

If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
4

Compute the market value of the stocks donated

Donations of stock or other non-cash property are usually valued at the fair market value of the property. There are special rules for determining fair market value of stocks (see post title IRS rule 561). StockDonator computes this value for you.
5

Maintain records

Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization and the date and amount of the contribution. For text message donations, a telephone bill meets the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given. Stock Donator maintains these records for you if you maintain a stock donator account. To claim a deduction for contributions of cash or property equaling $250 or more, you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash, a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. Stock Donator maintains these records for you if you maintain a stock donator account.
6

Qualified Appraiser not needed for stock donations

Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser. This rule does not apply to Stock Donations.
How IRS Publication 561 works for Stock Donations

Stock Donations made to a non profit organization (501(c)3) can significantly reduce the amount of tax you pay.

Donating stocks or other non-cash gifts allows you to legally evade paying income tax on the amount donated and capital gains tax on any appreciated value of the shares donated resulting in significant tax savings to you.