John Bullis: Using stocks to make charitable gifts

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Giving to your church or favorite charity is a wonderful thing to do. Getting income tax savings helps, but that’s not really why you give them your time and treasure.

The stock market has been good, with most stocks moving up in price. If you have some stocks or mutual funds that have increased in value since you purchased them, maybe you could consider using some of them to make charitable gifts?

This is good only for stocks that have increased in value more than your cost. If you have a “stinker” you no longer want to own and the cost is more than the current value, sell it and save taxes with the loss deduction. Then you save taxes with the loss deduction and you can give the proceeds to charity for the ordinary tax savings of Itemized Deductions.

If you have appreciated securities you have owned for more than a year, you can deduct their full value, not just the cost you paid. That will be a charitable contribution that would be claimed on form 1040, Schedule A-Itemized Deductions.

That kind of gift also avoids the capital gains tax on the profit.

You save the capital gains tax you would have paid on the profit and you save ordinary income tax for the increased Itemized Deductions.

There’s a limit on how much you can claim in the year of the gift of appreciated stocks — 30 percent of your Adjusted Gross Income (AGI). That’s the number on the bottom of page 1 of your form 1040. Gifts in excess of 30 percent can be carried over for five years.

This special income tax break (loophole) is not just for stocks. It also is available for other items that have increased in value such as art, jewelry, antiques and even real estate. Special rules apply for gifts of those items. Certainly you will need an appraisal that shows the value of the gift and form 8283 has some requests for other information.

If the charity sells the item, your deduction is probably the selling price. If the charity uses the item, then the appraised value is probably your deduction amount.

Some folks have made gifts of life insurance policies they no longer want or need.

We expect Congress will renew the provision to make gifts by withdrawing funds from you Individual Retirement Account (IRA) with the check going from the custodian directly to the charity. That can fulfill the required minimum distribution, but is not taxable income and you don’t list the contribution as a deduction. Maybe you use the Standard Deduction instead of itemizing. With a lower AGI, you may find less of your social security benefits being taxable.

Charity Gift Annuities can give a portion of the value as a charity contribution and you can have lifetime monthly or quarterly payments for you and/or your beneficiary.

Did you hear “Service is the best way to forget our own troubles” — Medra Pattillo.


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