Accept Stock Donations for Your Charity in 3 Minutes
overview
The traditional way of receiving support was through cash, check, or credit cards. Stock giving is growing faster than most other channels.
Cocatalyst is the easiest way to set up stock giving and takes less than 3 minutes. In comparison, brokerage firms are taking 1-3 months just to open account for entities.
Stock donations have different benefits; if you have a profit on your stocks, you can claim a charitable deduction equal to the securities fair market value and you can avoid the capital gains tax you would pay if you sold the stock.
Donating stocks helps you maximize your gift to nonprofits. It also helps you deduct up to 37% more in taxes.
Anyone who manages giving at a charity knows how much donations of cash can help with essential items. What you may not know is that you can also accept stock for your charity and it offers a varied number of benefits for both the charity and your donors. If you've been considering accepting stock donations or you want to know more about how it all works, we'll share all the details below.
Tax Benefits Stock Donations Over Cash
While you might be used to getting cash and physical item donations, have you considered why your donors might want to donate stocks instead? There are a few different benefits that might resonate with your donors and result in more donations or donations of a larger size.
Why receive stock share gifts vs charity cash?
When someone sells stocks, it can be taxed at over 37% of the value. That means more than a third of the money from the shares is going to the government. Even if the stocks were sold to make a donation, the money spent on taxes is gone forever and can't be used by the donor or the charity.
On the other hand, when donating stocks that are held at least a year, there are no taxes on the process. The entire stock is transferred at its valued price to your organization, which you can then choose to hold onto it or sell it immediately to use for needed items and services.
Also, donors who donate stocks instead of cash from stocks can get the entire market value deduction for the price of the shares. That isn't possible when selling stocks and then donating the money since a large portion of it is going into taxes. Since nobody wants to lose money, donating the stocks is a better option for someone who was already going to give to your nonprofit organization.
Accepting Online Stock Donations
Accepting stock donations is an excellent idea for any charity for many reasons. However, you might be wondering how to accept stock donations easily. You have a choice here between manually accepting this type of donation or using a service to handle the process for you.
While it is possible to accept stock donations on your own using a manual process, it can add a lot of work. This time and effort are better spent focusing on the essentials of your organization, not going through paperwork, and trying to ensure you don't miss a step when taking stock donations on your own. That's why there's a better way: online stock donations.
Cocatalyst offers a service that allows you to setup online stock donations and in less than the time that it would take for you to grab a coffee from the break room. The entire signup process is free and the only work you have to do is filling out a short form, adding a button to your website, and sharing that button with potential stock donors. It might sound too good to be true, but that's all there is to it! Note that we do charge a fee when donation are received.
Getting started accepting stock online with Cocatalyst
The steps are simple and easy. All you need to do are follow the instructions below:
1. Step one is to visit accept stock donations using Cocatalyst.
2. Fill out a short, quick form giving basic information about your charity.
3. Take the Cocatalyst Jumpstart button code from the website and add it to your charity's giving page.
That's all there is to it. Once you've completed these steps, you're ready to move forward with receiving stock donations.
Donors using Cocatalyst for Stock Donation
At this point, you may be wondering how Cocatalyst goes through the process of handling these stock donations for you. The good news is that it's just as simple for a donor to donate stock as it is for you to receive it when using this service.
How stock gifts work on Cocatalyst
1. Someone who wants to donate stock, ETFs, or mutual funds to your charity will fill out a quick and easy webform. We have a how to guide to use the stock donation form for those that need extra help.
2. Next, Cocatalyst will sync with brokers to collect the securities before moving on to the next step.
3. Once the stock, ETFs, or mutual funds have been received, Cocatalyst provides a tax receipt for the donor.
4. The sale price is optimized and then the securities are liquidated.
5. Cocatalyst looks for any employer gift matches, which offer an average of $5,000 as a bonus.
6. At this point, you get a check and all you had to do was place a button on your website.
In most cases, online stock donation funds are sent out in less than five days. If you signed up for the Jumpstart program with the company, you'll also receive reports in your email each month showing all of the transactions, including donor names, amounts of donations, dates when checks were issued, and tracking IDs.
Self Managed Brokerage to Accept Donations of Stock
There are two methods for accepting stock donations. While the second option requires more work, we want to go over what it involves so you can decide which method is right for you.
Update April 1, 2021: Brokerage firms like E*Trade and Schwab currently take 1-3 months to process account opening for entities such as charities.
Steps to manually receive stock donations
1. Your first step is to set up a brokerage account using one of the many providers on the market. In some cases, nonprofit organizations will get lower fees than individuals or companies, so make sure you choose the right provider.
2. Next, it's recommended that you build an instruction letter in PDF form, and send it to donors when they email in asking for a stock donation. This should have information including your nonprofit's name, broker name, transfer number, account number, phone number, and fax number. We recommend not putting this on your website, because since public account information may lead to check forgery or potential theft.
3. You may also need to create an investment policy if you only want to take specific stock donations. You should also think about whether you want to sell all stock as soon as you receive it or hold onto it. You want to make sure all information is in your policy so donors know what to expect.
4. You should have someone on your team monitor the brokerage account daily so you can immediately value the shares for your donor tax-receipt. If your policy is to sell the shares upon arrival, it's better to sell the shares the same day so you don't have an accounting difference between the donated value, and the actual cash proceeds. All donations should be tracked using an accounting program or your CRM. The information CRMs will ask for include the value of the stock, receipt date, stock ticker, date of sale, and number of shares.
5. The next step is sending out an acknowledgment and thank you letter to the donor, which is required for gifts over $250. The reported fair market value for the donor is required to be for the date of receipt, which is why having someone monitoring the account daily is crucial.
6. Ensure that all stock donations for your charity are included in your taxes. These donations are considered gifts and can result in penalties if you do not follow all the tax rules associated with them. If the stock donations aren't reported on your 990 tax form, it could cause problems down the line.
It's a lot of work, even if you have back-office financial staff available on a full-time basis. That's why many nonprofits choose to work with a Cocatalyst, so we can take care of all the details for you.
Start Taking Stock Donations Today
It's your choice which method you choose to accept stock donations, but as you now know, one option is a lot easier than the other. Cocatalyst supports all 501c3 organizations (including churches). Those who have questions or want to learn more on can visit help sections, or get support in chatbot in the bottom right. You can also Contact Us in our Help page.