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The Under 40 Financial Planning Guide: Charitable Donations of Investments

If you have an investment that has increased in value, you can donate it to charity, avoid paying taxes on the increased value, and get a tax deduction for the full amount of the property deducted.

For example: If you bought stock in Disney for $100, and it has increased to $200 in value, you have a profit of $100. If you are in a 28 percent tax bracket, and you sell that stock, you will receive your original $100, and $100 profit. You will have to pay taxes of $28 on your profit, leaving you with a total of $172. If you simultaneously made a $200 cash donation to your church, you would get a tax refund of $56 ($200 x 28 percent), so after the tax adjustment, your gift would have reduced your take home pay by $144. The combined effect of these two events is to leave you with a net benefit of $28 ($172 less $144).

An alternative is to give the stock to charity. You avoid paying the taxes on your profits, and you get a tax deduction for the $200. Which provides you with a benefit of $56, or an additional $28. From the charities' point of view, they are usually more than happy to receive stock.

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