You may be able to realize additional tax benefits by donating appreciated stock or donating through a Qualified Charitable Distribution from your IRA.
Do you own stock that’s increased in value since its purchase? If you have owned the stock for at least one year, there is a unique opportunity for philanthropy.
When someone donates securities to St. Paul’s, they receive the same income tax savings (if they itemize) as if they wrote St. Paul’s a check directly, but with the added benefit of eliminating capital gains tax on the transfer.
Making a gift of securities to support our mission is as easy as instructing a broker to transfer the shares.
How does it work? A stock purchased more than one year ago for $10,000, which has appreciated to $25,000 today, would trigger $2,250 in capital gains tax if sold ($15,000 X .15 capital gains tax rate). On the other hand, donating the stocks to St. Paul’s would generate a $25,000 income tax charitable deduction, and $0 capital gains tax.
Using assets other than cash also allows for more flexibility when planning a gift. For example, if aren’t ready to give up these assets during lifetime, a gift of securities through a will or living trust allows for the flexibility for the donor to change their minds at any time and continue to receive dividends and participate in shareholder votes; the securities are still the property of the owner if needed for other expenses.
Qualified Charitable Donation
When planning your IRA withdrawal strategy, you may want to consider making charitable donations through a QCD. A QCD is a direct transfer of funds from your IRA custodian, payable to a qualified charity. There are several advantages to making donations through a QCD.
If you have a Required Minimum Distribution (RMD) from your IRA, QCDs can be counted toward satisfying this requirement for the year, as long as certain rules are met.
In addition to the benefits of giving to charity, a QCD excludes that amount from your adjusted-gross income (AGI). This means that along with reducing your income taxes, it also could lower the amount of your Social Security benefit subject to federal income taxes and help you avoid or reduce income-related Medicare surcharges.
Also, QCDs don’t require that you itemize, which means you may decide to take advantage of the higher standard deduction, but still use a QCD for charitable giving.
Remember, an important rule is you can’t transfer the funds from your IRA to your personal account, then write a check from your account to your charity. The money must be made payable directly from the IRA to an IRS-approved charity.
There are a few additional rules that may apply, and you should talk with your financial advisor to determine if a QCD is right for you.
Take the Next Step
For more information on donating stock to St. Paul’s or using a QCD, please contact the finance committee by emailing [email protected].
This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact individual results.