Donating Appreciated Securities to Charity as a Year-End Tax Strategy

William Perez for About.com writes: Individuals may want to consider donating to charity any long-term stocks, bonds or mutual funds that have appreciated in value.

Here's why. If a person gives long-term, appreciated investment securities to a qualified charity, the person avoids having to include the capital gain income on her tax return. This keeps income and adjusted gross income lower compared to if the person sold her investment. Plus, the person gets a charitable deduction for the fair market value of the donation. Bottom lime: no income plus a deduction.

This strategy only best if the investment has been held more than one year (that is, it has a long-term holding period) and the investment has increased in value from when it was originally acquired.

This strategy may be particularly useful to higher-income people who are or might be subject to the new 3.8% net investment income tax. That 3.8% surtax is triggered if a person's adjusted gross income (with some technical modifications) is over $200,000 for single persons or over $250,000 for married persons filing jointly. This strategy can help keep adjusted gross income lower than it would otherwise be if the person had first sold her investment and then given cash to the charity.