Donating stock or securities offers a number of benefits to the donor. Gifts of stock, mutual funds, or bonds, especially when those securities have increased in value are often more tax efficient, because capital gains tax will be avoided when appreciated property is contributed to Covenant House New Jersey. Here's an example to show how if works:

John wants to make a $1000 donation to help Covenant House save more kids from the streets. Say John has a stock worth $1000 that more than a year ago, he paid $200 to acquire. John has a taxable gain of $800 in that stock. If he sells the stock he will owe some part of the $1,000 proceeds to the IRS. However, if John donates the stock directly to Covenant House he will get a tax deduction for the full market value of the security ($1,000 in our example), and he will not owe any capital gains taxes to the IRS on that $800 profit!

To continue our example, suppose John is in the maximum tax bracket. Then he would end up with a larger tax savings than the original purchase price of his stock. This means, in our hypothetical example, at the end of the year John has turned his original $200 investment into around $300 in his pocket, and CHNJ has a gift of $1,000 -- a real win-win proposition.

If you donate stock to Covenant House New Jersey you are entitled to a federal income tax deduction based on the stock's fair market value on the date of the gift providing you have owned the stock for more than one year. You may deduct donated stock worth up to 30% of your adjusted gross income and carry over the deduction for up to five additional years . Thus, if you have stock worth $10,000 that you wish to donate to our kids and an annual income of $40,000, you can deduct the full amount of your gift in the year you make it, thereby reducing your taxable income from $40,000 to $30,000. If your income was $100,000 and you wished to donate stock worth $100,000 to Covenant House New Jersey, you could deduct $30,000 for each of the first 3 years and then a further $10,000 in the fourth year.

Stock owned for one year or less is considered a short-term asset and usually won't produce attractive tax benefits by donating. Also, if stock has decreased in value, selling it and making a cash gift to the CHNJ will be more beneficial for you. In that case, you may take a capital loss on federal taxes, and still enjoy a charitable deduction up to 50% of your adjusted gross income.

Each gift of stock strengthens our mission while providing tax benefits for our supporters. If you have any questions about donating stock to CHNJ, or if you need additional information, please call Jennifer Tunnicliffe at 973.286.3410.