The year-end is a period when you may be thinking about charitable giving. According to data from Network for Good, in 2016, 29% of all giving happened in December, with 11% in the final three days of the year. But far from being an impulsive event and an expression of Christmas spirit, charitable giving can be tailored and planned for more positive impact in the cause of your choice. HCR Wealth Advisors also recognizes the opportunity to alleviate taxes – so now is the time to plan and execute the best charitable giving strategy.
Choosing to donate stock is a way to boost your charitable contributions. There are four chief arguments for deciding to donate stock instead of cash to your favorite charity.
Stock Donations are Tax-Deductible
Charitable donations need to be itemized to make use of tax deductions. But cash donors are met with a different ruleset on tax charges, also with an increased standard deduction. However, you also have the chance to help out in a more straightforward way by donating stock to charities. Donations of stock are limited to 30% of adjusted gross income.
Clear Your Portfolio of Tax Liability
Donating a highly appreciated stock to charity removes the entire tax liability, which is due on the appreciation of the stock. Federal capital gains taxes can be as high as 20% and certain states also impose capital gains tax at the state level. Hence, if you sell the appreciated stock and then plan to donate the tax proceeds, you may end up with a much smaller donation – deducting 3.8% Medicare tax on investment income, as well as federal capital gains tax and state taxes. In the end, you may end up giving less than sending the appreciated stock to the charity of your choice.
Find Better Use for Your Money
If you want to protect your cash better, you can donate stock directly from your portfolio, then deposit cash into your stock holdings in an equal measure. If you still want to own the appreciated stock, you can re-buy it at a higher cost basis, lowering the tax liability down the road. You could also further diversify the stock portfolio, to maintain your desired goals.
Give a Larger Donation through Stock
Many investors go the way of selling stock, then using the cash to donate to charity. By selling stock, however, you are causing a tax liability. When you donate stock to charity, there is the added benefit of receiving a tax deduction for the stocks at their full fair market value. This also translates into donating a larger gift to the charity – because you do not have to deduct the capital gains tax from the gift.
Donating cash to charities is instinctive and intuitive for many. But HCR Wealth Advisors is dedicated to finding and charting the best paths to the desired financial future of its clients – and charitable giving often should be an essential part of a personal finance strategy. Cash donations are fantastic, but it makes sense to explore whether donating stock may be a better value, and be more impactful for the charities.
HCR Wealth Advisors offers a wide array of personal finance, investment, and business-related services. The company’s vision is to offer personally tailored strategies, never resorting to boilerplate investment strategies. Exploring each client’s financial situation and goals means working with different cases every time. At HCR, dedicated advisors come up with actions specifically targeted to any client.
Whether short-term or long-term, HCR Wealth Advisors is always careful to adequately match each client’s life goals and stages with the right investment strategy.
Being aware of the opportunities for charitable donation touches upon several of the main points in personal finance – tax counseling, portfolio building, cash flow analysis. HCR Wealth Advisors is also ready to generate full philanthropic giving strategies, being careful to tailor the giving approach for maximum impact.
Charitable giving is not only a passive sharing of wealth, but thus becomes one of the active tools for portfolio management, reassessing appreciated stocks at the end of the year, and creating an opportunity to have an impact in helping others, while readjusting the opportunities for growth, stock earnings and stock selection. HCR Wealth Advisors can help get you ready for the season of giving, by presenting a new angle to value, taxation events, and personal finance opportunities.
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