This year’s post-election market is rocketing close to record-breaking numbers. Investors are responding with a tax-strategy of reviewing investments, selecting securities that have increased the most and donating them to charities as a means of decreasing their tax liabilities for 2016.
There’s been an increase in charitable giving using appreciated stock, says The Wall Street Journal, in “Why More Investors Are Donating Stock to Charity.” This uptick is based upon some assumptions about what Trump will do. Trump’s election means that it’s more certain that tax rates will be lower in the coming years. It means investors who donated appreciated stock before the end of the year, could have deducted their gift’s value from a 2016 tax bill that might be higher than the one in 2017.
On the campaign trail, Trump discussed changing the limits on itemized deductions. This could make charitable giving less valuable as a tax advantage in the future. Taxpayers can now typically roll forward unused charitable deductions for five years. However, it’s not certain if the President-Elect will make a change.
If you’re seeking a tax break from a donation, it’s typically better to donate stock rather than selling it and donating cash in a taxable account because there would be tax on the appreciated stock gains. There would be a tax deduction for donating the proceeds, but that might not offset the tax bill from the sale of the shares. It is better to donate the appreciated stock, so there would be no taxes on the gains and the donor would receive a tax deduction for the full market value of the shares.
If the stock has lost value, investors may decide to sell the shares at a loss and donate the cash proceeds in order to write off the loss against other capital gains. One option is a donor-advised fund (DAF), which allows an investor to set up an account for charitable giving and fund it with securities. Gifts to DAFs count as a donation on the day the stock moves into the fund for tax purposes, but the investor doesn’t have to disburse the money to a charity until a later date. They can also add more stock later. When making gifts for tax purposes, a DAF is a helpful vehicle to allow a donor to make a gift in a short period of time and then sort out in 2017 (or beyond) exactly how they want to distribute the funds to charity.
The time for this is nearly gone: it may take several days for the donation to move from your investment account to the not-for-profit’s account. If the gift is not acknowledged until after January 1, 2017, you could lose the tax advantage.
Do you live in Miami-Dade, Broward, or Palm Beach counties in Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (954-888-1747) right away for peace of mind. I can help!
- My practice is exclusively estate planning and probate,
- I have prepared numerous estate plans in 16 years of practice,
- I have administered estates and trusts through Probate all over Florida,
- I am a Certified Financial Planner Professional™, and
- I am here for YOU today and there for your FAMILY tomorrow.
Reference: The Wall Street Journal (December 11, 2016) “Why More Investors Are Donating Stock to Charity”