I have stock that's depreciated in value since I bought it. Just to make up some numbers, I paid $8000 for it, and it's worth $1000 now. If I donate the stock to charity, can I take the charitable deduction (if I itemize) of $1000 and the capital loss of $7000?
No. You should only donate appreciated stock.
If you own a stock at a loss, you can only deduct the FMV (fair market value) when you donate. Instead, you should sell it, take the loss on your taxes, and donate the cash.
No, it doesn't work like this. Your charitable contribution is limited to the FMV.
In your scenario your charitable contribution is limited by the FMV, i.e.: you can only deduct the worth of the stocks. It would be to your advantage to sell the stocks and donate cash.
Had your stock appreciated, you may be required to either deduct the appreciation amount from the donation deduction or pay capital gains tax (increasing your basis to the FMV), depending on the nature of your donation. In many cases - you may be able to deduct the whole value of the appreciated stock without paying capital gains. Read the link below for more details and exceptions. In this scenario, it is probably more beneficial to donate the stock (even if required to pay the capital gains tax), instead of selling and donating cash (which will always trigger the capital gains tax).
Exceptions. However, in certain situations, you must reduce the fair market value by any amount that would have been long-term capital gain if you had sold the property for its fair market value. Generally, this means reducing the fair market value to the property's cost or other basis. You must do this if:
The property (other than qualified appreciated stock) is contributed to certain private nonoperating foundations,
You choose the 50% limit instead of the special 30% limit for capital gain property, discussed later,
The contributed property is intellectual property (as defined earlier under Patents and Other Intellectual Property ),
The contributed property is certain taxidermy property as explained earlier, or
The contributed property is tangible personal property (defined earlier) that:
Is put to an unrelated use (defined later) by the charity, or
Has a claimed value of more than $5,000 and is sold, traded, or otherwise disposed of by the qualified organization during the year in which you made the contribution, and the qualified organization has not made the required certification of exempt use (such as on Form 8282, Donee Information Return, Part IV). See also Recapture if no exempt use , later.
See more here.