If you are a charitable organization, we know you are always looking for new ways to increase your donations. Many organizations take advantage of the tax incentives for donors, launching year-end campaigns in the hopes they will receive enough of a windfall to fund their operations in the coming year, upgrade their facilities, or expand their programming.
In times like these, it is even more important for organizations to maximize their donations every way they can. With the economy reeling from shutdowns due to the Coronavirus, nonprofits are hurting just as much as restaurants and bars.
But there is another way to use tax incentives to get bigger donations from your donors. Even within an organization’s existing donor base, there is a simple way to increase the amount ending up in your pocket. Just by asking donors to change the way they are making their donations, organizations can see up to 37% increases in the cash value they are receiving.
The most tax-efficient – and most lucrative – way to donate to charity is through stock donations.
Stock Donations & Tax Savings
Donating stock saves donors more on their taxes for one simple reason: capital gains tax. Let’s say a potential donor has a healthy stock portfolio, including an appreciated stock that he has held for at least one year.
If the donor donates this stock directly to your organization, he will not have to pay capital gains tax on the increased value. For example, if he donates $10,000 worth of stock gains, the organization will receive the full $10,000, and this is the amount he will write off on his taxes.
Instead, if the donor sells his stock that has gained $10,000 in value, he will have to pay a capital gains tax of up to 37%, in this case $3,700. That leaves him with only $6,300 to give to the organization and to write off on his taxes.
Stock donations maximize the amount in the organization’s pocket, and save the donor money on his taxes. It’s a win-win!
If you are a religious institution, donating stock to a church works the same exact way as any other charitable organization.
Relationships with Donors
Many organizations work hard year-round to build positive relationships with their donors. Some might worry that asking them to donate stock will feel like an invasion – but when donors learn of the potential savings, they’ll be grateful you pointed this out!
Some donors might like their stock portfolios just as they are, and aren’t looking to offload any of their appreciated stocks. That’s not surprising – but even a healthy portfolio needs to be evaluated occasionally. Stock donations create an opportunity for your donors to evaluate their portfolio, offload appreciated stocks, and buy up stocks that will create a healthy balance.
It’s worth noting that the tax benefits only exist if your donor is giving appreciated stock that he has held for a year or more. If he wants to donate a losing stock, he is better off selling the stock, taking the capital loss, and donating the cash value directly to the organization.
You may need to educate your donors on the potential savings of stock donations. Of course, some of them may already be donating their appreciated stock, and will be excited to learn that your organization will now accept their donations! For others, you can include language on your website or email campaigns encouraging donors to consider donating stock.
How To Accept Stock Donations
The process of accepting stock donations can be a bit tricky if you’re doing it on your own. Make sure you have a person on your staff who is an expert at getting the right information from donors and filing the necessary paperwork on time. You definitely don’t want to process a stock donation on January 1 instead of December 31!
If you’d like to have an easy, streamlined process of accepting stock donations, use a service that will make it just as simple and easy as accepting cash donations. Cocatalyst.org is a platform that makes stock donations using free online profiles and a simple form. Once your organization is set up in the system, you can receive stock from any donor!
To set up a free online profile, sign up as charity on Cocatalyst to accept stock donations. Cocatalyst will collect each donors’ information, liquidate the stocks for you, and send you a check. This way, your interactions with your donor base can focus on the amazing work of your organization, rather than hounding them for an unsigned form.
Get Started Now!
You don’t have to wait until the end of the year to accept stock donations. You can make this simple change today, and let your donors know about this smart, tax-efficient donation model.
Interesting related article: “What are Stocks?”