The holidays are here, and most of us have a variety of causes in mind for year-end giving. But while you may be tempted to simply write checks to charity, giving appreciated securities like stocks and mutual funds is an especially smart move to consider right now.
With the stock market at an all-time high, any money in taxable accounts has likely produced some significant, unrealized capital gains that will eventually result in a hefty tax bill. But by donating appreciated securities that you’ve owned for at least a year, you likely eliminate capital gains taxes and claim the value of the donation as a charitable deduction for 2017.
"If you want to give, donating an appreciated asset is always a smart move instead of making cash donations, especially now with the current market valuations," says Dan Grover, a senior private wealth advisor at Ronald Blue Trust in Charlotte, North Carolina.
Here are a few things to keep in mind as you consider giving securities to your Giving Fund at NCF:
Give now, grant later
The beauty of having a Giving Fund is that you can transfer shares now to take advantage of the year-end tax deduction, but you have unlimited time to decide which charities to support.
Stewart Welch, a financial planner and founder of the Welch Group, based in Birmingham, Alabama, explains his approach: “I strive to give away 10% of my income annually but, typically, I haven't decided on the exact amounts or charities. In order to get the tax deduction this year, I'll contribute to a donor-advised fund (DAF) such as my Giving Fund at the National Christian Foundation. With this strategy, I get the deduction at the time of the gift, but I can take my time to choose the charities, and the Giving Fund holds and invests the money until I'm ready to recommend grants.”
Don’t wait until the last minute
To transfer the shares to your Giving Fund, most banks and brokerage firms require a letter of instruction or letter of authorization, and a mutual fund company may have a special form. So it’s a good idea to start the process now so the transfer has plenty of time to be completed during the holidays. Mutual fund and publicly-traded securities must arrive in NCF's brokerage account by December 29. Visit our forms page for instructions, or from your Giving Fund, select the Give link in the top menu to get started with these tax-smart assets.
Take advantage of the tax law before it changes
Another incentive is the strong possibility of new tax laws in 2018. If the current tax reform bill – which lowers individual tax brackets and raises the standard deduction – is signed into law, the value of donating an appreciated asset next year will be lower.