Taxpayers are allowed a charitable deduction generally equal to the fair market value of the security and avoid paying capital gains tax on the unrealized gain. Thus, they are potentially giving more to the charity than if they had liquidated the asset and donated the cash net of taxes. Taxpayers must itemize in order to claim a charitable deduction.
When deciding to make a direct gift of stock or cash to the Fredericksburg Symphony Orchestra, remember that your deduction may be limited by your income. Because the FSO is a public charity, cash gifts are limited to 60% of AGI while stock (held for more than 12 months) is limited to 30% of AGI. If your deduction is limited by your income, excess deductions may be carried forward for up to five additional years. If you are looking to maximize your contributions, your tax advisor can assist with determining whether these limitations will apply and how best to fully utilize your deduction, if limited.