Giving to charity: a financial benefit

(WTNH) -- Maybe you know that Red Hot Chili Peppers song, "Give It Away," well 70 to 80 percent of American households do contribute to charity.

It is not just important for altruistic reasons, but as Wells Fargo financial adviser Fay Sheppard says, it can also help you financially.

Sheppard says the warm glow from charitable giving also reduces tax burden.

Gifts of appreciated securities are a popular way to benefit a favorite charity while sheltering the gains from taxes. By giving this way, the donor is allowing the charity to put to work 100 percent of the market value of the long-term appreciated securities, thus avoiding paying tax on the "built-in" capital gain.

Let's say you own an appreciated position of GE, now worth $10,000, acquired for $2,000. Sell the stock and you would be subject to capital gains tax on the $8,000 realized gain: a $1,200 tax bill. If you donate the stock instead, you can deduct the full amount as a charitable gift.

In addition to tax benefits, donors often have additional reasons for choosing to give stock. These might include lessening a concentrated position in a particular stock or preserving available cash for other needs.