Imagine this: You’re ready to donate money, but your wealth is stuck in stocks. This was the challenge for one of my clients during the war. He wanted to make a significant donation to help the soldiers, but his assets were stuck in investments that if he sold them, he would owe a large capital gains tax. So, he felt stuck. Fortunately, a change in Israeli tax regulations allowed him to donate appreciated assets, providing quick access to substantial funds and offering significant tax advantages. This strategy supported his charitable goals and reduced his tax burden—a win-win for him and Israel.
How to save the most tax
Consider donating your stocks that have significantly appreciated to avoid paying substantial capital gains taxes if you were to sell them later. By giving these stocks to non-profit organizations, you can save a considerable amount on taxes and make a greater impact with your donations. (This article is not intended to be tax advice, which we do not provide. Please consult your own tax advisor.)
Tax advantages of donating appreciated stock
Donating appreciated stock in Israel offers a double benefit: avoiding capital gains tax and receiving a substantial tax credit. When you donate stock that has increased in value, you bypass the capital gains tax you would incur if you sold the stock and then donated the proceeds. For example, if you bought a stock for $100 and it’s now worth $1,000, donating it lets you avoid the tax on the $900 gain. In Israel, donations to Israeli charities avoid capital gains tax and earn up to a 35% tax credit on the donation amount.
Strategic giving
Begin by setting clear, charitable objectives and then identify the non-profit organization that is close to your heart. By donating appreciated stocks, you can quickly access significant funds without having to liquidate assets and pay capital gains tax.
Navigating charitable giving and tax benefits can be complex, especially when two countries are involved. For insights on donating appreciated stock and its tax benefits in Israel, listen to our podcast at GoldsteinOnGelt.com/appreciated-stock. To maximize your charitable contributions or for guidance on which stocks to donate, contact our office at 02-624-2788.
Douglas Goldstein, CFP® is the director of Profile Investment Services, Ltd. www.Profile-Financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published November 6, 2024.