Tax treatment when selling stock and donating to charity

Question

I sold stock worth $100k (of which ~$40k was long term capital gains) with the intent to donate this entire amount to charity. I later realized that one can — with some effort — donate appreciated stock directly to the charity, which would have been a far better outcome for me tax wise.

I'm in a ~50% tax bracket (state + federal) for ordinary income and ~33% (again, state + federal) for long term cap gains. The scenarios are:

Scenario 1 (current)

• Sell $100k stock and donate proceeds to charity
• $40k capital gains — $13.2k tax due
• $100k deduction — $50k tax writeoff
• Net: $36.8k tax writeoff

Scenario 2 (ideal)

• Donate $100k of appreciated stock to charity
• $100k deduction — $50k tax writeoff
• Net: $50k tax writeoff

Is there any way I can reclassify/restructure my taxes to count the contribution differently? It feels unfair to be taxed more because of the order of operations :(

Answer 1

There is so much in the tax code where timing is important. In many cases, a day makes all the difference when a transaction occurring in one year (Dec 31) vs the next (Jan 1) can have a very different tax implication.

I am sorry for your loss. No, the situation is not reversible, as the stock is already sold.

It may not be any consolation, but yours is not the biggest mistake I've seen, nor, if you are able to donate this kind of money, is it impactful to your well being.

Answer 2

If you haven’t already made the charitable donation, you can still donate appreciated stock (assuming you still have some), and use the proceeds of the sale for some other purpose, such as diversification, for which you would need to sell more stock anyway.