Strategies for Charitable Giving – Part 2

by | Nov 20, 2023 | Established Professionals, Financial Planning, Integras Insights, Retirement, Women

If you are already charitably inclined there are two gifting strategies that you should be aware of, Qualified Charitable Distributions (QCDs) and gifting appreciated stock.

In Strategies for Charitable Giving – Part 1 we discussed the tax benefits of QCDs which can be done by IRA owners who are at least 70.5 years old. But what if you are younger and giving to charities? Are there any tax benefits available? Most people take the standard deduction since the Tax Cuts and Jobs Act increased it, and if you’re not itemizing you lose the ability to deduct charitable contributions.

If you have appreciated stock (owned for more than a year) in a taxable investment account, donating stock instead of cash could provide a tax benefit to you and result in a greater gift to the charity.

Let’s look at an example.

Jim plans to donate to his favorite charity. He owns $30,000 of Microsoft stock that he purchased several years ago for $5,000. Jim is subject to 15% capital gains tax. If he were to sell the stock, he would pay $3,750 in taxes, leaving him with $26,250 to donate. If Jim is able to itemize his tax deductions, he would be able to deduct $26,250.1

If, instead, Jim donated the stock directly to the charity, he would avoid paying the capital gains tax. The charity receives the full $30,000 value, rather than $26,250. And if Jim itemizes, he may be able to deduct the full $30,000.1

To be eligible for a charitable deduction for this tax year, donations of stock need to be received by the end of the year.

Determining charitable giving strategies is one way that we partner with clients. We can help you determine if donating appreciated stock is right for your situation.

Call us to review your investment approach (404) 941-2800.

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