#Deep link to this FAQ question
If you make a gift of appreciated stock directly to a charity, you will receive the benefit of a tax receipt for the fair market value of the stock at closing on the day the gift is received and not be subject to paying the capital gains tax. If on the other hand, you sell your stock and then donate the proceeds to charity, you will pay tax on one-half of the capital gain.
For example, if you were to donate stock that was originally purchased for $4,000 and now has a fair market value of $15,000, and your marginal tax rate is 50%:
Shares Detail |
Sell Shares on the Market |
Gift Shares to Covenant House |
Market value |
$15,000 |
$15,000 |
Cost of shares |
$4,000 |
$4,000 |
Capital gain |
$11,000 |
$11,000 |
Taxable portion of gain @ 1/2 |
$5,500 |
|
@ 0 |
|
$0 |
Tax @ 50% |
$2,750 |
$0 |
When you donate stock directly to Covenant House, you save $2,750 in taxes on your $15,000 gift. You will receive a charitable tax receipt for $15,000 which you can use to offset your taxes on other sources of income.
When we receive your donation of stock, we immediately sell the shares through the assistance of CIBC Wood Gundy, our investment firm. To begin the process, see our Share Transfer form.
(Note: the above example applies to capital gains realized in the year that is $250,000 and below. For capital gains realized in the year that exceeds $250,000 on or after June 25, 2024, the capital gains inclusion rate will increase from one half to two thirds of the capital gain)