Blog - Cash Isn't Always King

Jessica Smith
Vice President
Director of Financial Planning

Contact Us

Whether in the business or investment world, you’ve undoubtedly heard the phrase “cash is king.” The idea is that cash may be the best investment because it gives you options. Whether it is the opportunity to invest during a falling market or for a business to make an acquisition or investment, cash serves an important purpose. However, cash may not be king when it comes to charitable donations.


Tax law allows for favorable treatment of charitable donations. You can receive a deduction, if itemizing, for every dollar that you donate to a 501(c)(3) company (nonprofit). The deduction is limited to 50% of your Adjusted Gross Income (AGI) for donations to public charities and 30% of AGI for donations to private charities. The value of that deduction depends on your marginal federal and state tax brackets. For example, if you are in the 25% federal tax bracket and the 5% state tax bracket, each dollar given to charity is worth .30 cents of tax savings to you. This is a pretty sweet deal, right? You can save taxes by donating to causes and nonprofits that matter to you. BUT...the deal can be sweeter.


If you own an appreciated asset, like a stock or mutual fund, that has been held for over a year, then cash is no longer king for you. Instead, you get more benefit per dollar (and more options) by donating the appreciated asset to the charity because you not only receive an income tax deduction for the market value of the stock or mutual fund, but you also bypass the capital gains tax on any growth in the investment. This is a huge win-win. You get more tax savings and the charity still gets the benefit of the gift. Here’s an example:




Appreciated Asset

Fair Market Value


$10,000 (purchased for $4,000)

Long Term Capital Gains



Charitable Donation



Capital Gain Tax Avoided


$900 (assuming 15% federal)

Non-taxable Amount



*Total Tax Savings is increased if you pay state income taxes


Using an appreciated asset resulted in 9% more tax savings in this scenario than a direct cash donation.


Please notice that I said that cash may not be king. Deductions for appreciated assets are limited to 30% of AGI for donations to public charities and 20% for donations to private charities, which are more stringent than the limits for cash donations. Therefore, for a donor who is brushing up against these deduction limits, a combination of asset donation and cash donations should be considered.


Please contact your advisor if you are interested in learning more about donating appreciated assets.


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

NAPFA LogoFinancial Planner Association LogoCertified Financial Planner LogoFee Only Logo2017 Huntsville Mobile Small Business Winner Logo