Your family, your other loved ones, your favorite charity — you can benefit them and receive tax benefits for yourself by making gifts of publicly traded stock that has appreciated in value since you acquired it.
Benefit an Individual
Every year, you can give gifts of money or other assets of up to $14,000* each to an unlimited number of individuals free of federal gift tax. If you’re married, your spouse can also give $14,000 per recipient. As long as you stay within these parameters, annual gifts won’t count against your federal gift- and estate-tax exclusion of $5.45 million (in 2016).
With gifts of appreciated stock, the recipient of the gift assumes your original cost basis in the securities. Since you haven’t sold the stock, you avoid a capital gains tax liability. Your gift could be even more valuable if the stock’s price continues to rise after you make the gift. A gift recipient who’s in the 10% or 15% income-tax bracket could sell the stock and pay no capital gains tax.
Benefit a Charity
Donating appreciated stock to a qualified charity offers a tax-efficient way to benefit the organization. If you’ve held the stock for longer than one year, you’ll be entitled to take a charitable tax deduction for the market value of the gift (certain income limits apply). This strategy may allow you to make a bigger donation and receive a larger tax deduction than if you had sold the stock, paid capital gains tax, and donated the net proceeds.
* This amount is periodically adjusted for inflation.