Appreciated stock gifts.

I am not a big wine drinker, but when I do enjoy a glass of wine, I find that I really like a glass of Riesling. It goes well with chicken or pasta, and every now and then I might even have one with a good steak, although even a novice like me knows that you should always pair a steak with some type of red wine instead.

To me, Riesling goes with just about any entree or even dessert. In the same way, gifts of appreciated stock to charity pair nicely with other or complicated charitable giving strategies. 

This blog is intended to help you understand some basic concepts so that you can benefit your charity and also keep more money in your pocket and less money and uncle Sam’s. 

Let’s say you purchased stock 20 years ago and the stock has appreciated from $10,000 to $80,000. If you sell this stock, then you will pay long-term capital gains taxes on $70,000. However, if you gift these shares to a non-profit instead, your favorite nonprofit receives the gift tax-free and you avoid the capital gain. 

So what does this have to do with a good glass of Riesling? How does this strategy compare with other strategies as you implement your overall charitable giving plan? Perhaps you should pair this stock gift with:

Donor-advised funds. Donor-advised funds have become extremely popular since the tax changes in 2017. When you contribute to one of these funds, you receive the tax benefits in the year of the gift and can send the funds to your favorite non-profits in subsequent years. Consider giving for multiple years of giving into a donor-advised fund. By combining several years of charitable gifts into a donor-advised fund you have the potential to save several thousand dollars in taxes. Essentially, you will take these itemized deductions in the year of the gift, and then take the standard deduction in subsequent years while making all gifts from your donor-advised fund.

Charitable gift annuities and charitable remainder trusts. These types of strategies are now becoming more popular again because of higher interest rates. Essentially, you could donate appreciated stock to your favorite nonprofit and purchase a charitable gift annuity. The annuity will provide you with an income stream for the rest of your life, or for joint life with your spouse. Much of this income will be tax-free and you will also get a significant charitable gift deduction the year of the gift. While these strategies can be complex and require careful planning, they have the potential to benefit both your family and the non-profit you love. Win-win!

We hope you benefited by reading this blog. To meet with an advisor to discuss these strategies in more detail, click here to schedule an initial conversation. We have also created a free guide for you to download here: 5 Tax Strategies Often Overlooked

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

Investing involves risk including loss of principal.  No strategy assures success or protects against loss.

This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific tax situation with a qualified tax advisor.