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Give and receive

If you plan to give to charity and you’ve been considering selling some stock, you may be able to combine these activities and come out ahead. For taxpayers who itemize deductions, you can deduct the full value of a stock donation (given that you’ve owned the securities for more than a year) and not pay tax on the capital gains.

An example: You plan to give $1,000 to a charity. Instead of writing a check, you donate stock worth $1,000. (You bought the stock 10 years ago for $500.) The charity gets its $1,000, you get a $1,000 deduction, and you also sidestep $500 of capital gains. At 20%, that’s $100 of capital-gains tax you won’t be paying. You can even "buy back" the same stock immediately, as wash-sales rules don’t apply to stock sold at a profit.

One caveat: You must transfer ownership of the shares directly to the charity. Otherwise, you’re on the hook for the capital-gains tax. Most charities will be eager to help you accomplish this transaction. As always, you should consult a tax or financial professional to assess if this strategy makes sense for your specific situation.

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