By Rey Santodomingo, CFA, via Iris.xyz
It’s that time of year: The air feels crisper, the leaves look redder, and pumpkin spice futures suddenly seem like a good investment. But it’s also a key time of year for something that’s actually a thing: charitable donations.
Why now? According to a study by the Network for Good of donations made through its platform, in 2015, 29% of all giving occurred in December, and more than 11% took place in the final three days of the year. That’s some pretty stellar procrastination. However, if investors want to make the biggest impact on the cause of their choice—and cause the least tax impact to themselves—now is the time to plan and execute their end-of-year charitable-giving strategy.
That’s because the best way for investors to give charitably is by donating stock—not sending cash.
Reason 1: Like cash, donating stock to charity is tax deductible
Charitable donations are deductible only for those taxpayers who itemize deductions. But thanks to the tax-law change, for 2018 the hurdle for itemization is now higher: The standard federal deduction has doubled, to $12,000 for individuals and $24,000 for married couples filing jointly.
But high-net-worth investors with appreciated portfolios should have little difficulty stepping over this hurdle, by either itemizing deductions for other purposes or making sufficient charitable donations to clear the standard-deduction bar. Either way, this deduction remains a powerful way for those with the means to do so to help themselves while also helping the organizations they choose to support. And the deduction is the same whether the donation is made in cash or stock. Investors should keep in mind, however, that a donation in appreciated stock must be limited to 30% of their adjusted gross income (AGI).
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