Aug 16, 2012

Thinking Like a Couponer to Magnify Charitable Giving

We read about the die-hard couponers who clip and combine coupons to save massive amounts of money. I wish I were more skilled in this area. I'll clip a coupon if I run across one here and there, but I am certainly not as diligent as some. I neglect using coupons on smaller purchases, but as the price tag goes up I am sure to look for discounts. When I make a big purchase I do my homework, look for discounts and haggle.

Many families are the same way--they won't sweat the small stuff, but when making life's big purchases they make sure to capture as much savings as possible.

Did you know that doubling up on discounts can magnify your charitable giving? For many families, charitable giving to church, ministries and non-profits accounts for a meaningful piece of the monthly and annual budget. With donations over the course of a year adding up to substantial amounts of money, any savings in this area are certainly worth pursuing. Still, many American families fail to "clip the coupons" on their charitable giving. Most families still give cash or write a check. They miss simple strategies that could save thousands of dollars or allow them to give more generously.

Stop Gifting Cash & Start Gifting Stock - Imagine a family who tithes monthly to church and gives to a few of their favorite organizations. They cheerfully support causes they care about and they receive a charitable deduction that reduces their tax burden.

Imagine that this same family has investments with a large gain. Grandpa gave them shares of a stock years ago at $10 per share. It is now worth $100 per share today. If they were to sell that stock, they would have a $90 capital gain and would owe tax on that gain. The going rate today on that tax is 15%. Selling $10,000 worth of stock would cost $1,350 in taxes. ($9,000 gain x 15%).

If they were to gift that stock to their church or to a non-profit they cared about, that organization would get to deal with the taxes. The benefit to the non-profit is their tax-exempt status. Their tax rate on highly appreciated stocks is 0%.

If they were to gift $10,000 in stock, they would receive the same tax deduction as writing a check each month for the same amount, but they would multiply their tax savings by never paying the 15% capital gains tax.

If the stock was something they wished to continue investing in, they could buy it back with the money that they would have spent in monthly giving. They would then have a new basis of $100. They still own grandpa's old stock, but they have slashed the future tax liability. This is extremely useful in environments where we think taxes will rise in the future…like today.

Giving appreciated securities can save you taxes and magnify your giving.

Gifting Stock Using Your Charitable Checkbook – It is easy to give cash or write a check on a monthly basis, but it can be difficult to gift a security monthly. Many times a family will avoid this practice and miss out on the tax savings because of the challenge of giving stock monthly or the concerns around handing over a big gift once a year. Often the gains or losses in an account don't coincide with the needs of the ministries that you care about.

It may be appropriate to consider using a “Charitable Checkbook.” This may be in the form of a Donor Advised Fund or some other giving account. You can use this account like just like you would use your checkbook, but specifically for charitable giving. You can gift stock or add money when it is convenient for you. This fund can be held in cash or it can be invested. You can then use this charitable checkbook to make donations monthly, annually or as needed. This sort of gifting allows you to capture tax benefits when it is most appropriate and to give when and how you feel compelled to. This strategy can also work for families who are selling non-publicly traded stock in their own business or other highly appreciated assets.

Just a few small changes to your charitable giving can magnify the impact that you are having in your church and your community.
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