Maximizing Your Giving With Stocks
4 Tax-Smart Solutions
As stock markets fluctuate, your portfolio likely consists of winners and losers. Each may represent special gift planning opportunities that can also be advantageous. Here are four ideas.
Appreciated Stock
Do you want to dispose of a highly appreciated stock but hesitate because of the capital gains tax you would owe? With the maximum capital gains rate for stock at 20 percent, this is an obstacle that undermines an otherwise sensible financial move.
Fortunately, there may be a way to receive tax benefits and support Shriners Hospitals for Children®. How? With a gift of appreciated stock, you may qualify for an income tax charitable deduction for a stock’s fair market value and eliminate the tax on the appreciation.
In order to qualify for the fair market value deduction, you must have owned the stock for more than one year. If you acquired shares of the stock at different times, you can maximize your tax savings by donating the shares that have the lowest cost basis.
4 Tax-Smart Solutions
Overperforming Stock
Perhaps you own a stock whose performance has been outstanding, but you would rather not give it away because you expect it will continue to outperform other equities in your portfolio. And yet, this stock has produced large capital gains and would make a wise tax-saving charitable gift.
There’s an easy solution. Contribute the shares to Shriners Children’s. Then, buy the same number of replacement shares on the market. You’ll wipe out your past capital gains tax liability and still maintain your position in a favorite investment. To provide funds for the purchase, sell an investment that has lost money and take advantage of a potential capital loss deduction.
Depreciated Stock
For maximum tax savings on depreciated stocks, sell them and take any allowable loss. Donate the cash proceeds to Shriners Children’s. This way, you may qualify for a charitable deduction for the cash gift, and you can offset the losses against any gains this year.
If your overall losses exceed your gains, you can deduct up to $3,000 (if you are married and filing jointly; $1,500 for single filers) of the excess loss from ordinary income – and carry over excess losses to future years.
4 Tax-Smart Solutions
Disappointing Dividends
If you depend on dividends to pay your bills, you could be squeezed by rising living expenses.
One way to improve your bottom line is to put some of your low-dividend holdings into a life income gift such as a charitable gift annuity or charitable remainder trust. With a charitable gift annuity, you receive fixed payments for life. Often, you can increase your income when you donate low-yield securities. You may qualify for an income tax charitable deduction for a portion of the value of the gift and save on capital gains taxes when you contribute appreciated stock. It is also a great way to support Shriners Children’s when the balance becomes available for Shriners Children’s’s needs.
With a charitable remainder trust, the trust will pay you income for life or a term of years (up to 20). Then, when the trust ends, the balance will support Shriners Children’s’s vital needs.
To further capitalize on the benefits of a charitable remainder trust, contribute long-term highly appreciated stocks that pay you only meager dividends. You will unlock the appreciation without paying up-front tax on their capital gains – and you’ll receive a partial income tax deduction.