The holiday season is a popular time for people to make charitable gifts. If you plan on making a relatively large gift to a particular charity, you might want to pull out your latest investment statement instead of your checkbook.

The reason is that there is a potential advantage in gifting appreciated property held more than one year (including stocks and bonds) instead of cash.  Let’s say you paid $5,000 for a stock 5 years ago and today it is worth $10,000. If you were to sell the stock, you would realize a $5,000 long-term capital gain, which is subject to taxes. But if you instead gifted the $10,000 of stock to a charity, you don’t recognize the capital gain, but you are still allowed to take a charitable deduction on the full $10,000 amount. For those in higher tax brackets, this could save thousands of dollars in taxes.*

Not all charities accept donations of stock, but if you are in a position to make such a gift, it is certainly worth the effort to find out. The charity will provide instructions on how to transfer the asset to its account. But make sure it’s worth the extra administrative effort for you and the charity.  Keep in mind, for example, that through 2012 the long-term capital gain tax rate is 0% for those in the 10% and 15% tax brackets (state taxes may still apply to the gain).

What if you haven’t been so lucky with your investments? You still might be able to take advantage of the tax code! For example, if you have a stock that has declined in value, consider selling it to fund a cash gift to a charity. That way you can take advantage of a capital loss to either offset other gains or reduce your ordinary income (limited to $3,000 per year), plus the charitable deduction.

* Note that charitable deductions may be limited if your contributions are large relative to your income The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  You should consult with your tax advisor to determine a gifting strategy that produces the most tax savings.