By: Robert Hendrix, MBA
If you are planning to make a contribution to a charity, you should consider donating appreciated stock from your investment portfolio instead of cash. The DOW has improved greatly since the market low of 6400 in 2008. Investors are starting to pay capital gains again on the sale of their stocks.
This is a great opportunity for taxpayers to give to charities that are close to their heart, while saving tax dollars (who says you can’t have your cake and eat it, too?).
For example, if you purchased a stock in 2008 for $1,000 that now has appreciated to $10,000, and you sell that stock in the current year at a 15% capital gain rate, you would be paying taxes of $1,350 ($9,000 gain x .15). If you then donated the $8,650 that remained, you would get the deduction at your tax rate.
If on that same appreciated stock you decided instead to give it directly to your charity, you would receive a full credit of $10,000 without having to pay any capital gains on the appreciation of the stock. Now your charity gets a bigger donation and you receive a larger deduction on your taxes. Who would have thought tax planning would be so rewarding?
Another vehicle to donation is a charitable trusts. You can create a trust to benefit the charity or charities of choice and keep your investments in it. There are several ways to structure these trusts so that the income from the investments held in the trust can be split between you and the charity. You can even structure these to maintain some ownership of the investments that are in it.
These trusts can allow you to:
- Take income tax deductions spread over a period of time
- Create an income stream from the trust
- Help remove certain estate tax worries
- Give charities a way to plan on income in the future.
Remember, it’s always better to give than receive! The best part of certain charitable donations is that you can definitely give and receive at the same time.
One simple reminder, if you are going to receive these benefits, be sure to check that your charity is a qualified organization recognized by the IRS (Uncle Sam has to have some rules). For more information call Osborne Rincon CPAs at 760-777-9805.