by Ryan Turbyfill

Charities and Non-Profits fill a much-needed gap left by the Government and Public Sector to provide needs for Human Services, Education, Religion and so much more.  Below are a couple of interesting graphs on the Rise of US Giving and sectors of US Donations.  The three ways below allow you to help the charity of your choice but done strategically can benefit both the donor and charity.

Donate Investments – One way is to give appreciated stock directly to the charity.  Let’s say you bought 100 shares of Apple at $40/share in a non-retirement account. If you sold and gave the cash to the charity, you’d have a $17,800 Capital Gain to be taxed, (based on the today’s price).  That would diminish the after-tax amount to give.  Instead, donate the shares of Apple directly to the charity where you get the full appreciated price to write off on your taxes, the charity can sell the shares tax free to do the great work you’ve grown to love, a win-win for both.

Qualified Charitable Distribution – If you are over 70 ½ years old and have a retirement account (non-Roth) the IRS requires you to take a Required Minimum Distribution every year going forward which is counted as taxable income.  If you are donating to charity, instead, direct your advisor or brokerage firm to distribute all or part of the funds directly to your charity (up to $100k).  These funds are then not counted as your income as they go directly to a qualified charity and you never touch the funds.  Less taxes for you and the money goes directly to your charity, again a win-win.

Donor Advised Funds – These have grown considerably in popularity over the past few years.  Most brokerage firms and advisors can help you set one up; however, some do have high minimums, so feel free to reach out for one that meet your needs.  This works great if you have a windfall one year, say a sale of property, large bonus, inheritance, etc. and plan to give a portion to charity.  You may not want to do so all in one year though.  With this large windfall, you may have large tax obligations from capital gains or income tax, so you take the entire deduction the same year but can spread out your giving over many years.  A donor advised fund allows you to contribute, deduct the whole amount in that year, but keep the money in the fund, invest it and direct distributions out of the fund as you see fit over many years.  The growth in the fund over the years is also then tax free when distributed to the charity of your choice, a win for them and a win for you to take the deduction in year 1 and enabling years of donations to the charity.

We not only enjoy helping you meet and exceed your financial goals as your advisor, but even better when we can help you and your charity that you’re passionate about.

*Capstone does not provide tax or legal advice


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