Maximize Your Year-End Charitable Giving

December 21, 2017

As 2017 comes to a close, many of us are taking out our checkbooks and making our end-of-year gifts to the charities we support. However, if you are considering a larger gift, a better strategy may be to put away your checkbook and pick up the phone to your financial advisor instead. With the stock market at an all-time high right now, a look at your entire financial picture may reveal that it’s more beneficial to your bottom line to give a gift of appreciated assets than to give cash.

A gift of appreciated stock made directly to a charity gives you a dual tax benefit. You avoid paying taxes on the capital gains and you can write off the full value as a donation when you itemize your taxes, as long as you have owned the asset for over a year.

Another option, if you are 70 or over, is to consider a transfer from your IRA directly to your charity of choice. Under the current law, if you are over the age of 70½ you are able to transfer up to $100,000 from your IRAs tax-free by giving it to a charity. The gift counts as your required minimum distribution (RMD) for the year, but is not included in your adjusted gross income. This can be a great way to avoid having to pay taxes on your RMD while supporting a good cause.

There are a few factors to consider, but a quick look at the market and a brief call to your financial advisor may help you get a bigger tax break on a gift that you were already planning to make.

A final note: when considering a gift of stock, it’s best to start the process at least a week before December 31. Most investment firms require a letter of instruction or authorization to transfer shares to charity, and a mutual fund company may require you to complete a particular form.