Gift Of Securities
Appreciated securities (securities that have increased in value since you bought them) are common assets that individuals donate to charities. This method of giving has become increasingly popular in recent years.
Donating appreciated stocks or mutual funds held for over a year allows you to avoid capital gains tax while receiving a charitable deduction for the full fair market value.
1. Long-Term Appreciated Securities
Donating appreciated securities held for longer than one year (long-term securities), rather than selling the assets and then donating the cash proceeds, is one of the best and easiest ways to give more to the Kosciuszko Foundation (KF) and receive substantially greater tax benefits.
You can enjoy an income tax charitable deduction for the gift’s full fair market value and avoid tax on the capital gains. Furthermore, the KF will never owe capital gains tax either. It can sell the stock immediately or hold onto it without incurring tax on the appreciation you realized.
Example:
Teresa and Jola are sisters who both want to make a charitable contribution. Teresa donates to her church, while Jola gives to the KF. Both sisters purchased shares in Virtual Money Corp. back in 1998 for $10,000 each. Their investments now have a fair market value of $30,000 each.
Teresa sells her shares first. She realizes a long-term capital gain of $20,000 ($30,000 – $10,000). Assuming she is in the 15% long-term capital gains tax bracket, Teresa must pay $3,000 in federal capital gains taxes. She then donates the remainder ($27,000) to her church. Assuming she is in the 24% income tax bracket, her $27,000 deduction saves her $6,480 in income taxes.
Jola, conversely, donates her shares directly to the KF. She pays no capital gains tax on the $20,000 gain. She claims an income tax charitable deduction for the full $30,000 fair market value. Assuming she is also in the 24% income tax bracket, her $30,000 contribution generates a tax savings of $7,200.
Jola benefits more: the KF received the full $30,000, and Jola saved $7,200 in income taxes, whereas Teresa’s church received $27,000, and Teresa saved only $3,480 in “net” taxes ($6,480 deduction minus $3,000 capital gains tax).
Tax Note: Long-term capital gains rates for 2026 are 0%, 15%, or 20%, depending on your taxable income. Short-term capital gains (assets held one year or less) are taxed at ordinary income tax rates.
2. Short-Term Appreciated Securities
Gifts of appreciated securities held for one year or less (short-term securities) do not receive the same favorable treatment. Your charitable income tax deduction is generally limited to the cost basis (the original purchase price), not the full fair market value.
3. Depreciated Securities
If you own depreciated securities (securities worth less than you paid), it is usually more advantageous to sell the securities first, realize a capital loss, and contribute the cash proceeds. You may then claim the capital loss to offset other capital gains or deduct up to $3,000 of the loss against your ordinary income.
