Income and capital gain tax savings generated by a gift of stock of mutual fund shares can dramatically reduce your after-tax cost of giving. When you sell appreciated assets, you will be taxed on the gain in value. When the Unitarian Universalist Association (UUA) sells them, there is no tax on the transaction because the UUA is tax exempt.

An example, Jeannie Mae Eliot has 50 shares of Quikfix, Inc. stock which she bought ten years ago at \$10/share. Today, those 50 shares are worth \$20,000.

If Jeannie Mae Eliot sells the stock herself, she must pay capital gains taxes on the \$19,500 increase in the stock’s value since she purchased it. She is in the 36% tax bracket, and the capital gain tax rate on this asset would be 20%. After she pays tax on the gain, she will have \$16,100 of the original \$20,000 remaining to give away or reinvest.

If Jeannie Mae Eliot gives the stock to the UUA and the UUA sells it, then she saves both income taxes and capital gain taxes, as follows:

A. Federal Income tax savings on her gift \$7,200 (\$20,000 x 0.36)
B. Capital gains tax savings on her gift 3,900 (\$19,500 x 0.20)
C. Total tax savings \$11,100
D. After-tax cost of gift \$8,900
E. Net value of gift to UUA \$20,000

What are the new tax rates on capital gains?

Here’s a chart of the capital gain tax rates you are expected to pay, based upon how long you have owned or held the securities and your ordinary income tax bracket:

Tax Bracket              15%    28%    31%    36%    39.6%
Securities Held

12 Months or Less      15%    28%    31%    36%    39.6%
More than 12 Months  10%   10%    10%    10%     10%

How much will I be able to claim as a charitable income tax deduction?

You must itemize your deductions to be able to claim a charitable income tax deduction. How much you may deduct depends on how long you have owned the asset you are giving, the amount of your Adjusted Gross Income (AGI) in one year, and other gifts for which you are claiming a deduction.

The Holding Period
If you owned the security for 12 months or less (short-term appreciated property), your deduction will be limited to cost, or the purchase price you paid for the stock.

If you owned the security for more than 12 months (long-term appreciated property), your deduction will be for the full fair market value, calculated as a mean of the low and high market values of the stock on the day that it is transferred to the UUA.

Deduction Limits and Carry-Over Period

Gifts of cash and short-term appreciated property (see box above) are deductible up to 50% of your adjusted gross income (AGI) in one tax year. Gifts of long-term appreciated property are limited to 30% of AGI.

Unused excess deductions may be carried forward to the next tax year, for up to five years beyond the year of the gift.

Getting Started

Can I make a gift and receive regular payments for the rest of my life?

Yes. The UUA operates both a Pooled Income Fund and Charitable Gift Annuity Program.  These IRS-approved gift arrangements pay fixed or variable amounts to one or two individuals for the rest of their lives. After the death of all income recipients, the charitable gift is released to the UU group named by the donor.  These gifts may be used to support the UUA directly, and/or any UU-affiliated organization, including your local congregation. For more information contact: giftplans [at] uua [dot] org