Charitable giving strategy with tax advantages 

June 3, 2013 

Now is a good time during this current bull stock market to explore the tax advantages of making gifts of appreciated stock to support your favorite charities. Many people don’t think about gifts other than cash, but you really should consider appreciated stock because of the tax advantages. And if you, like many of the generous people in our community, support a number of charities, a simple way to support these charities is through your charitable giving account (also known as a Donor Advised Fund) at your Community Foundation.

When you donate long-term appreciated securities (stocks, bonds, mutual funds) to your charitable giving account at Truman Heartland Community Foundation you will experience considerable tax advantages to selling the securities and donating the cash. Then you can easily make grants to your favorite charities through your charitable giving account.

So, let’s look at the tax advantages of a gift of appreciated stock valued at $10,000 with a basis of $4,000 for a couple in the 35 percent tax bracket.

By donating long-term appreciated securities with unrealized gains directly to your charitable giving account you will be able to take a tax deduction up to 30 percent of your adjusted gross income for the full fair market value of the securities. Because the securities are donated rather than sold, capital gains taxes which are 15 percent for many people do not apply.

And for a married couple with total income over $250,000 you can avoid the additional 3.8 percent Medicare tax you would owe (a total tax savings of 18.8 percent).

If you sold the stock you would have to pay the capital gains and Medicare Tax and would only have $8,872 left to donate to your favorite charity.

By donating the stock directly to charity you will get a larger charitable deduction of $10,000 (versus $8,872) and avoid the capital gains, which is a net increase in tax savings to you of more than $1,500 versus selling and donating the cash. Consequently, you pay less in taxes and you have more to give to your favorite charity.

It’s truly a win, win, except of course for the IRS. Setting up a charitable giving account at the Truman Heartland Community Foundation is a simple process and provides you with a valuable tool to simplify your charitable giving process and amplify the impact of your gift.

Phil Hanson has been the president of the Truman Heartland Community foundation since January 2010. Raised in the Raytown area. He went to Rockhurst University for his undergraduate and UMKC for his MPA. He lead the fundraising staff for the United Way in Kansas City where he served for 23 years and later was with the American Lung Association for 3 ½ years.

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