Step # 6 - Making A Donation? Maybe You Should Give Stock Instead of Cash.
As we continue with my Ten Steps To Financial Freedom, today's idea is another that is not intended to change what you do, but help you to spend less and save more as you go about your financial life. If you don't plan to make charitable contributions this year, then this post will be of little interest to you. And if you don't own shares of stock or mutual funds the same holds true. But I find that many people make charitable gifts - to their church, their alma mater, a hospital, a social service organization. There is not a dollar threshold that must be met for a donation of shares to benefit you. Any amount you wish to give as a donation can be given as shares, and will be tax-deductible to the same effect as if you gave cash.
Here's the benefit: you pay no capital gains tax on shares that you give to charity. Simple as that. You still get a tax deduction, just as if you gave cash, but if the shares you give have risen in value over the years, you will not be responsible for any tax on the gains. And the recipient, your charity of choice, will also pay no tax on the gain (charities are exempt). If you have an investment that has performed particularly well over many years, you may prefer to hold onto such a good investment. You'd actually be better off to gift some shares and then use the cash you would otherwise have given to replace the shares you gave. In that way you will have made the same charitable contribution but still have your investment intact when the dust settles. The advantage would be that your cost basis would now be higher and your potential capital gain would be less if the shares were sold.
Best way to get a good answer to what will work for your personal circumstances is to give our Tax Director, Joe Arena, a call at 585-340-2000, or ask your Brighton Securities advisor.
Next - #7: Let's Talk About Your Mortgage
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).