Tax advantages can make donating stock instead of cash to charity very worthwhile. Here's how it works, if you're thinking of donating some stock:
First, note whether you've held the stock for one year or less (short-term), or for more than a year (long-term). Then, figure out its fair market value (FMV). This is what you would receive from the sale of the stock on the day you make the charitable contribution. It doesn't mean you have to sell the stock then -- just figure out its value on that date.
With stock held for the short term, you can claim as a contribution and deduct the FMV less the amount it has appreciated since you've held it. In most cases, this means that your deduction is basically your initial cost basis for the stock. So, stock bought for $800, held for the short term, and donated when it's worth $1,000 amounts to an $800 charitable deduction.
If the sale of the stock on the day of the contribution would result in a long-term capital gain, you can generally deduct the full FMV of the stock. For example, if you've held 150 shares for more than one year and they're worth $10 each on the day you donate them, you can probably deduct $1,500.
Your main decision is whether to sell the stock and donate the proceeds or whether to donate the stock itself. By selling it first, your gain counts as income, and it might affect your total taxes. By donating it, you don't recognize any income. If you do want to contribute stock to a charity, give the organization a jingle. It'll likely be thrilled and should help you make arrangements.
As with all tax-related issues, there are always details to consider that relate to your particular situation. You'd be well advised to consult a tax professional in addition to a Fool.
Also, to meet some fascinating charities, drop by our annual Foolanthropy charity drive, where we're raising money together for some very worthwhile causes.