Maximizing Impact Through Appreciated Assets

? Turn Your Assets Into a Force for Good ?

Looking for a savvy way to make a difference? Donating appreciated assets—such as stocks, real estate, or other investments—can transform your charitable giving while delivering significant tax advantages.

Why It Matters

Appreciated assets offer a unique opportunity to magnify your impact. Not only can you sidestep capital gains taxes, but your donation could also unlock a larger tax deduction, empowering you to give more effectively.

Three Benefits of Donating Appreciated Assets

1. Tax Efficiency: Avoid capital gains taxes and enjoy a charitable deduction for the full market value of the donated asset.
2. Enhanced Giving: Power Tax savings often enable you to contribute more significantly to the causes you care about.
3. Flexible Options: Whether it’s stocks, real estate, or mutual funds, appreciated assets provide versatile ways to tailor your giving strategy.

Case Study: The Power of Donating Appreciated Stock

A 65-year-old couple earns $2 million annually from their business. They own stock worth $1 million, purchased years ago for just $100,000.

• If they sell the stock, the $900,000 capital gain would be taxed at 20%, resulting in a $180,000 tax bill.
• By donating the stock directly to charity, they avoid the capital gains tax entirely and receive a charitable deduction of $1 million.

To calculate tax savings from donating appreciated assets, here’s how it works:

Key Tax Savings

1. Avoided Capital Gains Tax: The couple avoids the 20% tax on the $900,000 gain. Savings: $900,000 × 0.20 = $180,000
2. Charitable Deduction: The couple can claim a deduction for the full fair market value of the stock, $1,000,000. Assuming a federal tax rate of 37%, the deduction provides additional savings: $1,000,000 × 0.37 = $370,000
3. Total Tax Savings: By donating the appreciated stock, the couple not only avoids a significant tax hit but also channels their full $1 million to charity. This method leverages tax advantages to maximize both their savings and their charitable contribution.

Quick Tip

Work with your financial advisor or estate planner to identify the best assets to donate and structure your giving for maximum tax benefits and impact.

FAQs: Appreciated Assets Explained

Q: What kinds of assets qualify as appreciated assets? A: Common examples include publicly traded stocks, mutual funds, real estate, and other investments that have grown in value.

Q: Are there limits to how much I can deduct for donating appreciated assets? A: Yes, the IRS generally limits deductions for appreciated assets to 30% of your adjusted gross income.

Q: Can I donate a portion of an asset? A: Absolutely! Partial donations allow you to retain flexibility while still making a meaningful contribution.

What’s Next in This Series?

Here’s a preview of upcoming topics in Wiser Way to Give:

?? Using Life Insurance for Philanthropy: Big Impact, Low Cost Learn how life insurance can be a cost-effective yet powerful way to support your favorite causes.

?? Direct Giving vs. Establishing Foundations: What’s Best for You? Explore the pros and cons of direct giving versus creating a foundation, including factors like control, tax benefits, and long-term impact.

Disclaimer

This information is provided for general informational purposes only and should not be construed as tax advice. Please consult your tax advisor or financial professional to assess how these strategies may apply to your individual situation.

The information presented here is based on sources deemed reliable; however, we do not guarantee its accuracy or completeness. Always verify details with a qualified professional before making financial decisions.