Significant fluctuations in the S&P 500 have many people keeping an eye on their stock portfolios, as well as their retirement accounts. But did you know there are charitable giving strategies you can employ that aren’t dependent on the stock market? Here are a few tips to consider that will help you make the most of your charitable dollars, no matter the market conditions.
- If you invest in the stock market, a gift of appreciated stock is particularly impactful when the market is at its highest. However, you shouldn’t discount this giving strategy when the markets are down. Because you likely purchased the stock for less than its value today, it will have some appreciation. Oftentimes, if you want to rebalance your portfolio and trim back or eliminate this appreciated position from your portfolio, the tax implications could force you to either hold or sell the shares, thus resulting in a capital gains tax. The good news is you can avoid capital gains taxes by donating the appreciated stock to a free Charitable Checking Account℠ or another charitable fund at The Dayton Foundation. For example, if you give an annual donation of $2,000 to your church, synagogue or temple, you should look to your stock portfolio for a position that has appreciation and donate that stock in kind to your fund or CCA. Then, you can use the $2,000 balance in your account to make donations to your place of worship throughout the year. No donation is too small, and you can even set up a recurring donation to automatically send your monthly gifts. It saves you time and money, provides a tax deduction (if you are able to itemize) and eliminates capital gain taxes, allowing the entire amount to go to charity.
- If you are over age 70 ½, are charitable and have a traditional individual retirement account, your best source of current giving is your IRA. Remember, you do not have to wait until you are required to take a distribution from your IRA. When the laws increased the required minimum distribution age, the qualified charitable distribution did not change. You can use your qualified charitable distribution at age 70 ½ regardless of when you must take your RMD. This is a great way to make sure your IRA money is not taxed, because a QCD helps you avoid both state and federal income taxes. If you are writing checks from your banking account to charity, you are using money that you already have paid income taxes on. A better strategy is to keep this money in your bank account for other needs and reach into your traditional IRA, which isn’t taxed and has grown tax deferred. With a QCD, 100 percent of what you donate goes to charity. Thus, more money goes to charity and you don’t have to pay taxes. If you don’t want to make a withdrawal from your IRA until you are required to take a distribution because you want to keep this money in the stock market, you always can take the money from your bank account and invest in a non-qualified stock portfolio.
For more information about how these strategies can help you maximize your charitable giving, contact me, Nakia Lipscomb or Marianne Requarth at (937) 222-0410