When reviewing your financial strategy, it is always good include the topic of charitable giving.
Giving to charity not only helps with your tax planning, but is a core element in a socially-responsible strategy for your wealth. Continue reading to learn more about charitable giving and end of the year financial planning in Northern Virginia.
What Can You Donate to Charity?
The gifting process is nuanced. There are several ways to give including cash, stocks or securities, and property. If you choose to donate securities, you can balance your charitable gifts while simultaneously replenishing a tax-managed portfolio with cash.
Charitable Giving and Taxes
Consider a charitable gift of $20,000 in cash that comes from your earnings and is given directly to a charity.
Let’s now say you give the same $20,000 in the cash example but as securities or stocks. In this example we’ll assume the securities have appreciated by 100%. In effect, you’ve given only $10,000 of your earnings and $10,000 of appreciated value.
Giving Stocks or Securities as Charitable Gifts
If the securities were held for at least one year then IRS allows investors to take deductions from donated securities if the dollar amount sold is less than 30% of the investor’s adjusted gross income (AGI). The benefit of giving securities instead of cash includes eliminating capital gains tax liability from the growth of the investment.
In addition, you can consider a cash replenishment after gifting securities. By reinvesting, you get the benefit of a cost-basis increase. In addition to the potential for eventual tax-loss harvesting, which should help reduce future tax payments.
Charitable Giving and Future Tax-Loss Harvesting
Charitable giving is an important factor in a sound wealth management strategy. The gift of securities with cash replenishment provides the taxpayer with the current-year tax deduction, avoidance of capital gains, and the potential for future tax-loss harvesting opportunities.
Assessing the amount to give and the specific securities to gift can be challenging for many investors. The tax benefit depends on the appreciation of the securities. Unfortunately, it isn’t always simple to calculate or predict the market value of securities selected for gifting. Additionally, you’ll want to keep your portfolio balanced for growth if you choose not to do a cash replenishment.
[Related Article: Socially-Responsible Investing]
Help with Charitable Giving and End of the Year Financial Planning Northern Virginia
Charitable giving is an important factor in wealth management strategy. It is good to discuss maximizing the deduction, avoidance of capital gains, and the potential for future tax-loss harvesting.
We recommend speaking to a professional to go over your unique needs and to decide on a plan of action for your year-end charitable giving in Northern Virginia. To get started, contact Argent Bridge Advisors online or call (833) 568-4900 today to meet with one of our financial advisors.