Give Appreciated Assets vs. Cash
Although there have been many attempts in the past to limit the tax deductibility of charitable gifts of appreciated assets to the donor’s cost basis, the “Tax Cuts and Jobs Act of 2017” made no changes to the existing rules. This means that you can still contribute appreciated assets to a charity and deduct the fair market value of the asset, up to 30 percent of your adjusted gross income (AGI). Donating highly appreciated assets instead of cash can be one of the best ways to lower your taxes because it eliminates the need to pay taxes on the capital appreciation of the asset, AND you can deduct the fair market value of the donated asset from your AGI.
For example, if you own shares of stock in a publicly traded company and these shares have appreciated greatly, you will pay taxes on the gains when you sell the shares. The amount of tax you will pay depends on how long you have held the stock and size of your capital gains. By contrast, if you donate these shares of stock to a charity, you will pay no taxes on your gains, and you can deduct the value of the stock as of the day you made the gift. This can provide you with significant tax savings compared with selling the stock and then donating the cash. This gifting strategy works particularly well following a long bull market, like we have experienced since 2008. Regrettably, many people do not take advantage of this opportunity because they become attached to the stock. But as I remind my clients, if we still like the stock, we can always buy it again with the cash they would have otherwise donated.