Many people like to give to the poor, but like all things related to money, taxes are something always coming to mind even when you are doing charitable work. The reasoning behind that is in order to give money, you need to have money. Recognizing this, IRS has decided to cut some breaks to the taxpayers. Like almost everything else pertaining to taxes, it can be a complicated procedure to take advantage of these breaks.
The IRS allows you to deduct the cost of the stocks that you contribute to a charity. In order to save even more money, you need to know what kind of stocks you are giving away to charity. Short-term gain on stocks (stocks held for less than a year) is only deductible at the price you bought the stock at. Long term gain on stocks (stocks held for more than a year) is deductible at the fair market value of that stock, including all the appreciation it has gone through since you bought it.
Never give away stocks that are losing you a lot of money or stocks that are appreciating too quickly. You may be better off selling stocks that are losing you money and claiming them as capitol loss. After that you can contribute the money to the charity for a contribution deduction. Stocks that are making a lot of money may have appreciated so much and is such a large stock that its value is worth more than 30% of your adjusted gross income. You cannot contribute more than 30% of your gross income to receive the contribution deduction.
