Smart taxpayers are already planning on how they will reduce their taxes for next April's return. Some are figuring out how to show less income, others are trying to bolster their number of deductions. What if you could do both at the same time? This is it! The best tax reduction strategy I've ever seen: donating appreciated stock or other appreciated assets to a charitable organization.

Many of us have already made a commitment to ourselves to make charitable contributions to good causes. In fact, most successful business people are quick to admit that somehow, giving money to a good cause ends up making them more successful. Of course, Uncle Sam will think very highly of you too, and give you a deduction for being philanthropic. So, what's the big deal with donating stock vs. the same value in cash?

Normally, if you have stock (this goes for art, homes, or anything that you purchase as an investment as well) that appreciates in value, you have to recognize the capital gain when you sell it, and pay taxes on that gain. If you held it for at least a year, you'll pay the lower long-term capital gains tax. If you held it for less than a year you'll have to pay the higher short-term capital gains tax. However, if you never sell it, but donate it instead to a qualified charitable organization, you have never triggered a taxable event, thereby completely avoiding having to report the capital gain (and avoiding the tax that would go with it).

Here's the kicker, not only do you get to avoid paying taxes on the increase in value of your asset in other words, reducing your reportable income, you also get to claim the full deduction of the increased asset price as your charitable contribution. You get to deduct the full value of the stock (or other asset) as of the day you donated it!

If you're going to make a charitable contribution to a qualified organization anyway, and you own stock that's appreciated, why not relieve yourself of some capital gains tax, and get a deduction for something that you got to pay less for than what it's worth now?!?

Here's a practical example of how it works. Let's say that Mr. Brown owns 100 shares of stock in Apple Inc. that he bought 3 years ago at $50 per share. That same stock is now worth nearly $170 per share. His investment went from $5,000 total to $17,000 in 3 years. If Mr. Brown decided to do what he always does and donate cash to his favorite charity, he would get a deduction for the amount

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