The stock market has been on a wild ride recently. We enjoyed years of great returns until COVID-19 shocked Wall Street, leading prices to plummet in March 2020.  They recovered quickly until early this year when Russia’s invasion of Ukraine, supply-chain concerns and inflation worries led to another big dip. And yet, at the time of this writing, stocks have begun to recover.

For those considering “tax-wise” ways to support their favorite nonprofit organizations, it can be difficult to figure out what to do next. Here are three things to consider:

1. Many people can still take advantage of double tax-savings by donating stock.

Despite a rocky 2022, many investors own stock or mutual funds that have significantly increased in value, especially if they purchased shares some time ago. If they sold those shares, they would probably owe capital gains taxes on their profits. For shares owned longer than one year, federal capital gains tax rates can be as high as 20%. Taxpayers whose income exceeds certain thresholds could also pay a 3.8% surtax pursuant to the Affordable Care Act. Some states would tax that profit, too.

But donating those shares to a public charity (like Duke!) could yield a double benefit.

First, the donor should not be liable for any capital gains taxes on donated shares because she wouldn’t sell them…she would donate them. After that, Duke would sell the shares but wouldn’t pay taxes either because Duke is tax exempt. Thus 100% of the value of the gift would be put to use in support of the donor’s favorite area on campus.

Second, the donor would receive an income tax deduction for the full market value of the shares. This would lead to a lower tax bill and more money in her pocket come tax-filing season. Of course, to take advantage of this tax deduction, the donor must itemize her deductions on her next tax return. Many folks who itemized in the past now take the standard deduction instead, but it’s possible that a gift of stock would cause those folks to switch back to itemizing in the year of their gift (especially when combined with deductions for state/local taxes and mortgage interest).

Donating stock to Duke is easy to do. You can start the process by visiting stockgifts.duke.edu or by forwarding that link to your stockbroker or advisor. If you’d like to donate mutual funds instead of stock, please call us first because the process is a bit different, but many people make gifts to Duke that way each year. It’s not hard!

To benefit from the tax advantages outlined above, the donor must have owned the shares for at least one year. I’ve also assumed that the shares are publicly traded and not subject to any sale restrictions.  But, if you own shares that are privately held or restricted, please let us know because there are charitable strategies there, too!

2. This may be a good time to consider donating stock to establish charitable gift annuity.

If you have appreciated stock or mutual fund shares on hand and would like to convert that asset (which goes up and down in value every day the stock market is open) into a steady stream of income (which never changes despite what is happening in the market), consider establishing a charitable gift annuity with a gift of those shares. Duke just increased the rates we pay new gift annuity donors so this is a particularly interesting time to explore them. For more information, visit our website or contact the Office of Gift Planning for a personalized illustration of tax deductions and payout rates available to you.

3. There is a charitable strategy if you own stock that has lost value since you purchased it.

If you own shares that have gone down in value since you purchased them, you might consider selling those shares instead of donating them because you may be able to use that loss to offset gains in other assets or even offset a bit of ordinary income. You could then donate the cash proceeds of the sale to Duke and claim a tax deduction.

The rules of “harvesting” tax losses to offset gain or income are a bit complex, so if you are interested in this strategy please talk to your CPA or other financial advisor about whether it is right for you.

In fact, please be sure to talk to your advisors about all of the strategies discussed in this article because they are in the best position to know what fits your specific situation. Then, give us a call!

About the author

Jeremy Arkin

jeremy.arkin@duke.edu

With more than 20 years of experience in gift planning and development, Jeremy helps Duke alumni, parents and friends find ways to support Duke that complement their larger personal and financial goals. He understands the ins and outs of giving techniques that involve tax, retirement, and estate planning. He also develops strategies for donating complex assets such as real estate and private business interests. Jeremy lives a few blocks from East Campus with his wife and their pup, and when he’s not at work he plays the double bass in the Durham Medical Orchestra.