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As the year-end approaches, nonprofit leaders are focused on maximizing their annual giving campaigns and engaging donors in meaningful ways. Offering the option to gift securities—such as stocks, bonds, or mutual funds—is a powerful way to drive impactful giving. This approach benefits not only your organization but also the donors, especially as they look for tax-efficient ways to support their favorite causes. For nonprofit leaders, understanding the mechanics and advantages of stock donations can be the key to a more prosperous and successful year-end.
In this blog, we'll explore why gifting securities is such an effective giving strategy, how it benefits both nonprofits and donors, and why it's crucial to offer this option as part of your year-end giving strategy.
The Benefits of Gifting Securities for Nonprofit Organizations
1. Larger Donation Amounts:
One of the most compelling reasons to encourage gifts of securities is the potential for larger donations. Because of the tax efficiencies associated with donating securities, donors often feel more comfortable giving at a higher level, which can lead to a significant increase in the average gift size. According to recent data, gifts of appreciated securities tend to be up to 30% higher than cash gifts.
2. Cost-Efficiency and Easier Processing:
Receiving securities as donations is often less complicated than many nonprofits realize. With the right brokerage account, these gifts can be accepted and processed with minimal administrative burden. Establishing this capability can set your nonprofit up for repeated gifts year after year, as donors return to the tax benefits associated with these gifts. A streamlined system not only makes donation processing easier but also strengthens donor relationships and the likelihood of repeat gifts.
3. Year-End Appeal and Donor Retention:
With the end of the year being a crucial giving season, nonprofits benefit by positioning securities as a donation option during this high-traffic period. Many donors give through stocks specifically at year-end; in fact, nearly 50% of all annual stock donations occur in the final quarter of the year. Capitalizing on this timing by promoting stock donations can help nonprofits engage more donors, increase donation sizes, and retain their support year over year.
Why Donors Choose to Gift Securities
1. Tax Efficiency and Increased Impact:
One of the biggest motivators for donors to gift securities is the associated tax savings. When a donor gifts appreciated stock, they can often avoid capital gains taxes—saving as much as 37% depending on their tax bracket and the gains involved. For example, if a donor originally bought shares for $1,000 and they are now worth $5,000, donating them instead of selling them would allow the donor to bypass capital gains tax on the $4,000 appreciation.
Additionally, donors may still be eligible for a charitable tax deduction at the full fair market value of the securities. This makes stock gifts a highly tax-efficient way for donors to maximize their contributions. With the U.S. seeing nearly $30 billion in stock gifts donated to nonprofits annually, there is clear evidence that many donors recognize these tax advantages and choose to give accordingly.
2. Diversification of Assets:
Many high-net-worth individuals maintain substantial investments in the stock market, and gifting securities allows them to diversify their portfolios while supporting causes they care about. Donors may find they hold concentrated positions in specific stocks and choose to gift shares as a way to rebalance their portfolios in a tax-efficient manner. For nonprofit leaders, understanding this motivation can be a helpful point of connection when speaking to affluent donors who wish to diversify while making impactful contributions.
Why Now? The Year-End Surge in Stock Donations
The final quarter of the year is by far the most active for stock donations. While stock gifts account for around 15% of all charitable giving in the U.S., nearly half of these donations happen in the last three months of the year, aligning with tax planning and year-end giving deadlines. With total stock donations to U.S. nonprofits approaching $30 billion annually, it’s clear that many donors prefer to give in the form of securities, and timing plays a key role.
This timing is no coincidence: as the end of the year approaches, individuals engage in tax planning and look for opportunities to reduce their taxable income. The deadline for making charitable contributions that qualify for deductions in a given tax year falls on December 31, creating a strong incentive for stock donations during this period. By highlighting securities donation options in year-end appeals, nonprofits can align with this seasonal uptick and help donors achieve their philanthropic and financial goals.
Best Practices for Offering Securities as a Donation Option
1. Educate Your Donors:
Many donors may not be aware that stock gifts are an option, or they may not fully understand the tax benefits. Nonprofits can add educational content to their websites, emails, or donor newsletters to explain how the process works and why it's advantageous for donors. By including real-world examples and scenarios, nonprofits can demystify this type of donation and encourage supporters to consider it as a giving option.
2. Communicate Year-End Deadlines and Benefits:
With the clock ticking on tax deadlines, it's crucial to make the case for stock donations as part of your year-end messaging. Don’t be afraid to communicate how a securities gift could help donors meet tax objectives while contributing more impactfully. A clear call to action—such as a dedicated "Give Stock" button on your website—can also make the process more accessible.
3. Streamline the Process with a Broker or Financial Partner:
Partnering with a financial service that specializes in securities donations can help make the process smooth and efficient for both the donor and your organization. Look for services or brokers that can facilitate and manage these transactions seamlessly. By having systems in place, your nonprofit can offer donors a straightforward and positive experience, reducing any potential friction.
Embrace Securities Donations for a More Impactful Year-End
The benefits of accepting stock donations are clear for both nonprofits and donors. By offering securities as an option during year-end giving campaigns, nonprofits not only increase the likelihood of larger donations but also meet the needs of their donors who seek to give in tax-efficient ways. With nearly half of all stock gifts happening at the end of the year, now is the time for nonprofits to educate, prepare, and promote securities donation options.
As nonprofit leaders, encouraging these types of gifts can deepen donor engagement, increase annual donations, and position your organization as a forward-thinking partner in philanthropy. Embracing stock gifts as a regular part of your year-end strategy is a powerful way to help your nonprofit—and your donors—achieve their goals.
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