John Bullis: Is it time to give some stock to charity?

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If you are likely to do itemized deductions on your 2019 U.S. Individual Income Tax Return, maybe it is time to consider giving some common stock that has gone up in value.

The fair market value of the publicly traded stock on the day of the gift is an additional income tax deduction for charitable contributions.

If you own a stock you are willing to part with, and it is worth more than your original cost, you get a deduction for the fair market value if you give it to your church or favorite charity.

That means you do not pay tax on the appreciation, but you do get a deduction for the full market value (your cost plus any increase since you bought it).

It is important to have owned the stock for more than one year and a day so it is a long term capital asset. That is probably easy enough to do. If you have owned the stock for several years, it is clearly a long-term capital asset.

For example, if you purchased 100 shares of a stock in 2015 for $2,000 and today it is worth about $3,500, you could consider giving it to a charity. You are not taxed on the $1,500 increase in value, but because it is a stock listed on a major exchange, your charitable deduction is $3,500.

Before you look too hard at this, it would be good to review your 2018 return and look at the itemized deductions on Schedule A. If you guess the 2019 itemized deductions will probably save you some income tax, and you want to make a gift to your church or a charity, you might consider looking to see if you have a publicly traded stock you might give.

Another possibility is to give your stock to a large, well established charity (Salvation Army, Red Cross, etc.) in exchange for payments to you for your lifetime. That is a “Charitable Gift Annuity.” The amount of income paid to you depends on your age and a few other factors. The charity still gets a benefit, but not the full market value of the stock since most of the value is used to fund the annuity payments to you. Only part of the payments to you will be taxable.

You have also heard of the gift of all or part of your required minimum distribution (RMD) from your IRA (if you are 70 ½ year old). None of that direct transfer to charity is taxed, it does count toward meeting your RMD but you do not get an itemized deduction for the gift. You need to work with your stockbroker to do this correctly.

Did you hear: “We need to do a better job of putting ourselves higher on our own “to-do” list.” — Michelle Obama


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