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  • Writer's pictureSteve Coker, CFP

Give Stock, Save Taxes, Give More

If you are feeling the bite at tax time, here is a great planning idea to help reduce your taxes for 2019: give appreciated stock instead of giving cash. Many investors have stock that has gone up in value during the stock market rally and now may be a great time to use those gains for charitable purposes.

Giving appreciated stock has many advantages compared to simply giving cash. Not only will you be allowed to deduct the appreciated value of the stock, you also eliminate capital gains on the donated stock, giving you a double benefit compared to giving cash. For example, if you give $10,000 worth of stock with a basis of $5,000 you could receive a tax deduction for $10,000 AND save an estimated $1,250 in taxes (assuming a tax rate of 25%) that you would have paid when you sell the stock. If you still like your stock, you can use the cash that you would have donated to repurchase the shares, resetting your cost basis for tax purposes and still saving the taxes. In fact, giving your winners, and selling your losers can be an excellent tax strategy, especially for those in the higher brackets.

Of course, there are limits on gifting appreciated stock, so it is best to talk with your advisor or CPA to make sure the strategy makes sense for you. The rules can be complicated but here are a few basics that you should know: 1) You can deduct appreciated capital gain assets (such as appreciated stock) up to 20% of your Adjusted Gross Income. This is lower than the cash charitable contribution limit of 60% of adjusted gross income. 2) You must itemize deductions for the charitable contribution to matter. The standard deduction has been increased to 24,400 for married couples filing jointly for 2019, and $12,200 for singles. This means that your total itemized deductions must exceed these thresholds before the charitable deduction will reduce your taxes. You will still avoid the taxes you would have paid on selling the stock, but the charitable deduction may not help. 3) You will need to get a receipt and have clear documentation of the value of the stock that you donate. Not all charities are sophisticated enough to handle these types of transactions. If your charity does not know what to do with stock, consider gifting the stock to a Donor Advised Fund. You’ll still get the benefits of donating the stock, and the fund can send cash to your charity.

So, what is the bottom line? If you are writing checks to your church or favorite charity and you have appreciated stock, talk with your advisor. The strategy could save you money on your taxes, allowing you to give more and make a bigger impact – that is what I call a win-win.

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