One of the most tax-efficient ways to give a financial gift to your favorite charity is with long-term appreciated securities. While gifts of cash are easy to make by simply writing a check, don’t overlook the potential benefits of gifting stock that has gone up in value. By considering both options, you may be able to increase the tax benefit and make the most of your year-end tax planning and gifting goals.
Here are four tips to consider:
- If you own stock investments (held longer than 12 months) with unrealized capital gains, the best way to give may be with a portion of stock rather than an all cash donation. By gifting stock, you receive a deduction for the market value and reduce future capital gains tax liability.
- If you own stock with short-term gains (owned for less than 12 months) the strategy is not optimal because your tax deduction will be limited to the amount you paid for the shares.
- If you think the gifted stock still has upside potential, you can use the cash you would have otherwise donated to replace the shares of stock you donated. This will reset the stock cost basis to the current market value, reducing future capital gains tax liability.
- If you are holding taxable investments that have lost ground, it may be preferable to sell the investment, claim a capital loss, take the charitable deduction and gift the cash. In this scenario, the combined tax deductions may make this strategy a winner.
Making the Call between Gifting Cash or Appreciated Stock
If you are looking to support organizations important to you and maximize your tax benefits, it is important to consult with your tax advisor and include your financial planner to make the most of your tax planning and lifetime gifting goals.
Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.
Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-036845