TAX-AWARE STRATEGIES FOR GIVING TO CHARITY
The COVID-19 pandemic has presented serious challenges for citizens throughout the world. This crisis has been particularly onerous for the less fortunate members of our community. Non profit organizations that help the underprivileged, are in serious need of your support.
Despite the economic obstacles presented by the COVID-19 pandemic, we are in the midst of a pretty unbelievable stock market recovery. This is an excellent time to take a look at your stock portfolio and decide on any actions that you may want to take while the stock market is near all-time highs. This may be an ideal time to think about your charitable giving for the year.
SHOULD YOU GIFT STOCK OR CASH?
Donating stock to charity is simply one of the most tax-smart ways to give. If you are inclined to make a charitable contribution for 2020 it makes sense to gift appreciated stock. You will receive a double benefit in that your contribution will be:
Fully tax deductible based upon the fair market value of the stock (up to the limit allowable by the IRS).
In addition, you can avoid paying any potential capital gains by gifting the stock directly to charity. A few things to remember:
You Must Gift Stock That You’ve Held More Than 1 Year.
You Must Itemize Deductions On Your Tax Return To Claim The Deduction.
The CARES ACT Allows Up To $300 Per Person ($600 if Married Filing Jointly) To Be Deducted Even If Don’t Itemize And You Take The Standard Deduction.
Consider “Bunching” Future Donations All In One Year To Qualify For Itemized Deductions.
MANAGE THE RISK IN YOUR PORTFOLIO
This may be the perfect time to inspect your portfolio for any positions that need to be reduced to help manage your overall risk exposure. If you have one stock position that makes up more than 10% of your portfolio, a portion of that investment should be trimmed and may be a prime candidate to be gifted to your favorite charity. The key to this strategy is to donate the stock while the markets are up, so if you plan to make a contribution, you should act now. This will maximize both your tax deduction and the financial benefit to your favorite charity.
GIFTING TO CHARITY FROM YOUR IRA
If you are in a position to help, you may consider a QCD (Qualified Charitable Distribution) from your IRA. The CARES act was passed by Congress, to provide relief in response to the COVID-19 Pandemic. As part of this legislation, all RMDs (required minimum distributions) have been waived for 2020. However, for those who would normally be required to make a distribution from an IRA account, you may still make a QCD to a charity in 2020 of up to $100,000. If you are married, you and your spouse may transfer up to $200,000. The funds must be paid directly from your IRA to the charity. You will not pay taxes on the distribution. This will benefit you in the future as the balance of your IRA account will be reduced and thus lower the amount of your required minimum distributions over time.
P.S. If you have any questions please contact me and I will be happy to guide you through the process. Also, you should consult with your tax advisor regarding your giving strategy.
Investment Advisory services offered through Triad Hybrid Solutions LLC, a registered investment advisor