TABLE OF CONTENTS
- Why should I consider donating shares to charity?
- How do I donate shares?
- Why can’t I donate to charity from Betterment’s mobile app?
- When is the deadline for making a charitable contribution?
- How do we calculate the eligible balance for making a donation?
- How long do I have to hold shares to be able to donate them?
- Why can’t I donate my short-term capital gains?
- Will a donation cause rebalancing in my account?
- Can I donate shares from goals using Tax Coordination?
- Can I donate shares from my Betterment IRA or 401(k)?
- Can you donate to charity with shares from goals using any portfolio strategy?
- Which charities can I donate to through Betterment?
- I represent a charity. How can we be included to accept donations from Betterment customers?
- How do I report my charitable donations?
- How do I get my receipt for my charitable donation?
- How will donating shares to charity through Betterment affect my tax forms?
- TurboTax is requesting cost basis for my donation I made through Betterment. Where do I find that information?
Read more about donating shares here.
Betterment is not a tax advisor, and the information provided here should not be construed as tax advice. It should only be used for informational purposes. Please consult a qualified tax professional and refer to IRS Publication 526 and IRS Form 8283 to determine the rules that apply to your individual tax situation.
Why should I consider donating shares to charity?
If you are someone who typically donates money to charity and you have a taxable investing account with gains at Betterment, you should consider making share donations from your account rather than in cash. While both cash donations and share donations (held long term) have the same tax deduction, donating appreciated shares has an additional tax benefit: avoiding the capital gains tax on the sale of your investments. Whether you sell today or sell in the future, you’ll typically pay tax on those gains when you sell. Donating shares, and replacing the shares with an additional cash investment, results in a lower embedded tax liability, while keeping your investing goals on track.
How do I donate shares?
Log into Betterment and select from the menu, the taxable goal you wish to donate from. Once you’ve reached your goal Overview, select “Transfer or roll over” and choose “Give to charity.” You can then specify how much you would like to donate and which partner charity you would like your donation to go to.
After the gift is initiated, you’ll be prompted to make an optional deposit, which would replace the donated shares to keep your goals on track, and potentially avoid a rebalance.
Why can’t I donate to charity from Betterment’s mobile app?
This feature is not yet available on our mobile app. However, if you would like to make a donation from your web browser, you can do so by logging in. Next, select from the menu, the specific goal you wish to donate from. Then, select “Transfer or Rollover” to see the “Give to Charity” option.
When is the deadline for making a charitable contribution?
You can make a charitable contribution of shares at any time, but it will only be eligible to be deducted in the taxable year in which it is made (which ends each year on December 31). We process donations only on business days when markets are open, so we recommend making a donation no later than the second-to-last business day of the year in which you wish to claim the donation. As an example, if you’d like for a donation to be eligible to be deducted on your 2017 tax return (which you file by April 17, 2018), make sure to submit your donation on or before Thursday, December 28, 2017.
How do we calculate the eligible balance for making a donation?
Your eligible balance is the total value of all shares in your portfolio in taxable accounts that have gains and have been held for more than a year (long-term gains). We don’t currently enable donation of shares held for less than a year because the tax benefits are reduced. Read more here.
How long do I have to hold shares to be able to donate them?
Betterment Charitable Giving will enable you to donate shares with long-term gains that have been held for more than one year from the day of purchase. In the “Give to charity” flow of a specific goal, we will calculate the dollar value of those eligible shares. You can donate any dollar amount you would like up to the eligible amount. Our algorithm will automatically select the shares to give with the biggest potential tax benefit.
You can navigate to the Charitable Giving option by first selecting your appropriate goal within the menu. Next, select “Transfer or roll over” and then “Give to charity.”
Note that each additional share purchase (including new deposits, reinvestment of dividends, tax loss harvests) has its own one-year period until it becomes long-term.
Why can’t I donate my short-term capital gains?
Donating shares with short-term capital gains has a lower tax benefit than donating shares with long-term gains. It’s typically better to wait to donate shares until they have been held for more than a year so that you can maximize your potential tax benefit. Because of this, we only allow customers to donate shares with long-term gains.
Will a donation cause rebalancing in my account?
Donations of shares from your Betterment account typically will result in a decrease of one or more asset classes, depending on the shares our charitable donation selection algorithm selects to transfer. The algorithm prioritizes maximal tax benefit over the best allocation outcome, which can introduce allocation drift to your account, similar to when markets move your holdings in different directions. Because of this, our rebalancing algorithm, which checks your account daily, may seek to rebalance your account after the donation completes. There are two things to be aware of:
- You can avoid a rebalance by making a deposit equal to the amount of your donation right after you complete your donation. This helps keep your allocation and goal on track. The resulting portfolio has a higher cost basis (i.e. lower embedded tax) than if you didn’t make a donation from the account.
- If a rebalance does occur, it will use our TaxMin lot sorting algorithm, which sells losses before gains, followed by long term gains. It also avoids short-term gains, and selects the lowest long term gains first. So if a rebalance does occur, the tax impact of it can be minimized.
Can I donate shares from goals using Tax Coordination?
Yes, you can donate from any taxable investment account managed by Betterment, even one that is part of a Tax-Coordinated Portfolio, as long as it has long-term gains (held longer than one year).
Can I donate shares from my Betterment IRA or 401(k)?
No, only shares held in a taxable account can be donated.
Can you donate to a charity with shares from goals using any portfolio strategy?
Yes, you can donate from any taxable investment account managed by Betterment, no matter the portfolio strategy, as long as it contains shares with long-term gains (held longer than one year).
Which charities can I donate to through Betterment?
UNICEF, World Wildlife Fund, Feeding America, Big Brothers Big Sisters of NYC, Boys and Girls Club of America, Breast Cancer Research Foundation, Save the Children, Wounded Warrior Family Support, Hour Children, Against Malaria, DonorsChoose, GiveWell, and more to come.
If you would like to request another charity be added, navigate here and select “Suggest a charity” at the bottom of that screen.
I represent a charity. How can we be included to accept donations from Betterment customers?
Email email@example.com for all requests to accept donations from our customers.
How do I report my charitable donations?
Charitable donations are reported as itemized deductions on personal income tax returns. Taxpayers who claim the standard deduction do not report their charitable donation(s) on their tax return. Betterment optimizes tax deductions for charitable donations by only allowing our customers to donate appreciated investments held for over one year.
How do I get my receipt for my charitable donation?
We will email you a finalized tax receipt at the end of the business day that the share transfer to the charity is completed. You will also be able to find your receipt in Documents.
How will donating shares to charity through Betterment affect my tax forms?
Charitable donations will not show up on your 1099-B tax statement. Since you gave away shares with gains instead of selling them, this action will not be reported to the IRS and is not a taxable event.
If you itemize your deductions to take charitable deductions, you (or your tax software or accountant) will report the donation when you file your taxes. Your donation receipts, available in your Betterment account in the Documents section of Activity, will be useful in this process. Donation receipts are kept for your records and are not filed with your taxes.
For non-cash charitable contributions (including share donations from Betterment) over $500, you must fill in a Form-8283 when you file your taxes.
If you’re using TurboTax or another tax filing software, it will typically ask you about your donations details and fill out the Form-8283 for you.
This information is not meant to be tax advice.
TurboTax is requesting cost basis for my donation I made through Betterment. Where do I find that information?
Betterment does not currently provide charitable donation cost basis information, but we may provide it in the future. However, the way Betterment’s charitable gifting product works means that the basis information is not relevant for tax purposes.
In general, if you donate shares that have appreciated in value since the time of purchase and that you have owned for more than one year (which is the case when you donate through Betterment), the fair market value on the date of donation is used to calculate your itemized deduction. If you donate shares that you have owned for less than one year or shares that have gone down in value since the time of purchase (which you cannot do through Betterment), the cost basis or the fair market value, whichever is lower, will be used to calculate the deduction for which you are eligible. Again, Betterment optimizes tax deductions for charitable donations by only allowing our customers to donate appreciated investments held for over one year.
To help you complete the charitable donation section of the TurboTax flow, we’ve provided an example:
- You donated long-term appreciated shares on December 15, 2017 worth $1,500. TurboTax prompted you to list the date you acquired those shares and the cost basis. You are unsure of the date, but you know you were only able to donate them through Betterment (which means they were held for over one year). TurboTax wants to confirm you purchased these shares more than one year prior to the date of donation so entering any date that is more than one year prior (for example, September 15, 2016 which is more than one year earlier than December 15, 2017) is sufficient.
- TurboTax then prompts you to list cost basis and you do not have it readily available. Because you donated through Betterment you know that these were appreciated shares. Entering any amount less than market value to confirm the shares were appreciated shares would be sufficient (for example, $1,262, which is less than $1,500, the donated value).
Here is a screenshot illustrating the example above:
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