By Chip DeBuse
The end of the year always seems to sneak up on us, doesn’t it? One minute, we’re watching fireworks on the fourth of July and then next – the season of giving thanks and gathering with friends and family is upon us. Many folks use the end of the year as a special time to give back to their community through charitable gifts and acts. Since 1955, the Lincoln Community Foundation has been privileged to serve as a steward for this year-end generosity, connecting donor passions to local needs.
Of course, there are many ways to make a meaningful year-end charitable gift. A gift of appreciated stock or mutual fund shares provides an enhanced tax benefit when compared to a gift of cash. The donor receives an income tax charitable deduction for the full value of the donated shares and pays no long-term capital gains tax on the appreciation.
For example, Elena purchased stock for $3,000 ten years ago that is now valued at $10,000. If she sells the stock, she will incur a capital gains tax of $1,050 ($7,000 appreciation x 15% capital gains tax rate). Instead, Elena chooses to use the stock to make a charitable gift. In her 28% tax bracket, she enjoys a deduction of $2,800 for the full fair market value of the stock ($10,000). She also avoids the $1,050 capital gains tax liability she would have paid if she sold the stock. Therefore, the net cost of her gift is only $6,150 ($10,000 – $2,800 – $1,050) compared to $7,200 for a cash gift of $10,000.
There’s another giving technique that’s gaining traction lately for folks of a certain vintage. An IRA charitable rollover allows donors of a certain age to make a tax-free transfer from an IRA directly to a qualified charity. The amount transferred is not eligible for a charitable income tax deduction, but it counts toward the donor’s annual required minimum distribution (RMD). This is an especially attractive option for donors that must take IRA withdrawals they do not need.
Donors can use these taxwise giving methods to benefit the charitable organizations that reflect their interests and passions. Your financial advisor or the Lincoln Community Foundation can help you make these creative gifts. Please let us know if we can be a resource as you reflect on how best to make an end of year gift that is meaningful to you and your family. I can be reached at (402) 474-2345, or firstname.lastname@example.org.