As we get closer to year’s end, requests from organizations doing great work pour in. And there’s a good reason for that. In the U.S., the majority of all charitable giving happens in the fourth quarter. As generous donors consider which charities to financially support, they should also consider what assets are the best to donate.
The type of donation could make a big difference between money going toward taxes versus supporting charitable organizations. Many of us own highly appreciated assets that could be subject to long-term capital gain taxes, such as stocks. For example, donating that Amazon stock you were wise enough to purchase 12 years ago will help you to avoid long-term capital gain taxes and net you a charitable tax deduction. It’s a win-win: by selecting the right asset, your impact goes further, allowing you to give more to charity and potentially less to Uncle Sam.
While contributions of cash and publicly traded stocks are among the most popular asset classes to donate, consider talking with your tax advisor about other donations that might make the most advantageous, tax-wise gift, including:
- Qualified charitable distribution from your IRA (if you are over the age of 70 ½)
- Real Estate
- A privately held business interest
- Life insurance
With the end of year quickly approaching, this might just be the right time to make that charitable gift. However, each individual’s tax situation is different so remember to talk with your professional advisor to see what might be right for you.
Sheila Kinman, CAP® is the Senior Vice President of Philanthropy at the Community Foundation where she helps donors design and fulfill their charitable giving goals. She is also a Charted Advisor in Philanthropy (CAP®), a designation that provides knowledge for guiding charitable individuals, businesses, and foundations.