Friends Don’t Let Friends Give Cash to Charities

Cindy Wysong

12 minutes ago

3 min read

Contributed by: Cindy Wysong, CFP®

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The leaves are changing colors and our weather is beginning to chill. As the holidays quickly approach, it’s a great time to reflect and count our blessings. For some, it’s also the time of year that inspires us to think about how we can give back.

Being charitable is a personal choice and one that doesn’t always have to involve financial resources. As I write this article for The Hive, I know you ladies are well aware of the different ways you might feel called to give – whether that’s with your time, unique skillset, or financial means.

For those of you who are inclined to make financial gifts, did you know that cash isn’t always the best source from which to make that gift? If financial giving is part of your charitable goals this year, there are a couple of strategies worth discussing that may make your generosity even more tax-efficient.

Using Appreciated Securities

If you have an appreciated security (such as a single stock or mutual fund) that has been held for over a year, the IRS allows you to gift these shares directly to your charity of choice. Bear in mind, the charity must be a 501(c)(3).

Example: You bought 100 shares of Home Depot stock for $60/share in 2012. You’ve owned these shares since then and they are now trading for $300/share. You spent $6,000 for an investment that is now worth $30,000. You have an embedded unrealized capital gain of $24,000, which will likely result in taxes once the shares are sold.

Because the math is easy here, let’s assume you want to give $9,000 to a charity. Now, you could SELL $9,000 worth of your Home Depot stock to come up with the cash. That’s a nice solution, but you would realize capital gains (in the amount of $7,200) in the process.

Instead, after reading this article, you choose to transfer 30 shares ($9,000 in value) of Home Depot directly to your charity. You do not realize the gain and neither does the charity!

Plus, if you itemize your deductions, you can likely deduct the charitable gift from your income. The result? You support a cause you care about while potentially reducing the tax cost of your generosity.

Using your Traditional IRA

Another idea is if you are at least age 70.5 and own a Traditional IRA, you have the unique ability to gift directly to a qualifying charity using funds from your IRA.

This strategy is called a Qualified Charitable Distribution, and it is a fabulous option for fulfilling charitable gifting using pre-tax dollars.

Additionally, if you are subject to an annual “Required Minimum Distribution,” your gifting can help satisfy part or all of that requirement.

While these two options are not the only ways to fulfill gifting, they are two of the most popular strategies we help our clients deploy. As we enter this season of gratitude and generosity, perhaps a little bit of planning ahead of time will help you meet and exceed your philanthropic goals!

Cindy Wysong is a Partner and Wealth Advisor at BCWM, LLC.

To contact Cindy:

Email: cindy@bcwm.com

Telephone: (913) 685-2300

www.bcwm.com

This information is provided for general information purposes only and should not be construed as investment, tax, or legal advice.