2017 has been another big year in a long-running bull market. Your portfolio is probably full of holdings with significant capital gains. To avoid paying the tax on those gains, you may be holding onto securities you’re ready to sell. What to do? Well, if you have any charitable giving goals, consider giving away your capital gains bill in the process. How does this work exactly? Here are 6 considerations to help you maximize your giving impact in 2017.
Instead of writing a check for a $100,000 gift to your favorite cause, use a Charitable Gift Fund (CGF) and avoid paying the capital gains taxes on your best-performing investments.
A perfect example we often see involves Apple stock.
$10,000 in Apple stock 10 years ago is worth $100,000 today, with a $90,000 capital gain. Selling this Apple stock for cash would result in more than $20,000 in taxes. Instead, give away your $100,000 in Apple stock, deduct the full $100,000 against your income and never pay that $20,000 tax bill. The charity gets to keep the full $100,000 and doesn’t pay the taxes either. Charitable gift funds make that process seamless.
Skipping this process and writing a check directly from your checking account is tax inefficient. Grab the low hanging fruit.
Check your charity’s efficiency score on www.charitywatch.org/. It’s not the only way to evaluate a cause, but it’s interesting to know where your money goes and how it gets spent.
One way to engage the family in your financial world is to talk with them about who you give to and why it matters to you. Share your stories, provide context and ask the same in return. Your family members, especially younger generations, will be grateful and honored to be asked to be involved in important decisions like this.
How much can you give and how much can you deduct from your taxes? The simple answer is you can deduct up to 20% of your adjusted gross income (AGI). If you make $500,000/yr, you can give away $100,000 without running into further complications. With some clever tax maneuvers, you can get up to a 50% deduction based on your AGI. We can help you with the complex cases.
We have 16 business days left to take advantage of the benefits of the Charitable Gift Fund in 2017. The process is instant but it takes action. Ask us for assistance – that’s what we’re here for.
– Max Osbon