One of the happiest times for me as a financial planner is when, after many years of working hard, saving and planning wisely, I have the opportunity to let our clients know that they have reached their financial finish line - they are essentially done saving and can now really focus on what it means to truly live abundantly and give generously. A second joy is when I have the opportunity to teach concepts of giving smart and giving more by using strategies that are available to us through the current tax laws.
For over 20 years, I have been a financial planner, and have volunteered in many community and industry organizations, often in leadership roles. The most exciting times were when I was able to help others discover what it meant to, “Live Abundantly. Give Generously.TM”, our company’s tagline. When I was the Chairperson of the Financial Planning Association’s Pro Bono Forum, it was great fun to help the 100 chapters, at that time serving 24,000 members, find ways to give back to their individual communities. Many chapter leaders from across the country participated in the Forum, seeking out the best ways to serve their communities and increase their giving.
Recently, I had the opportunity to participate in the Kingdom Opportunity program, presented by The Barnabas Group of Orange County, where we connected marketplace leaders with ministry opportunities. In a “Shark Tank”-like event, I helped vet 33 amazing charities, and ultimately gifted five different charities with financial resources and gifts-in-kind to help them achieve their ministry goals. It was exciting to learn about the powerful impact these ministries were making in our backyard and around the globe. All of the charities were Christ-based initiatives.
Using a combination of tax smart giving strategies stretched my donation farther, and the joy of contributing to and extending His Kingdom was overwhelming. I thank God that, as a financial planner, I get to educate others on opportunities where they can make their gifts do more for the philanthropies they care about. From a single, appreciated stock transfer into our families’ giving account through a donor advised fund, we gave to churches, to India, to the Philippines and to the five Kingdom Opportunity charities all over the world, and we still have funds left waiting to be donated…
As the end of the year is approaching, there may be great ways to leverage your contributions for Kingdom causes by updating the way you give. One very common, yet surprisingly inefficient way to give to a charity, ministry, or to your church, is often to give cash. Let’s look at why.
Wouldn’t it be exciting to give more by giving smart?
Below are three strategies (and there are many more), that you might be able to utilize to give an additional 10%, 20%, 30% by virtue of the tax savings.
1. Consider donating stock directly to the charity or through a giving account: If you own appreciated stocks or mutual funds in a taxable account, you likely have a significant opportunity to pay less tax, give more, and improve your personal cash flow. If you give through a charitable fund, you could also simplify the accounting for the donor.
How it Could Work (see chart below)
- Determine the amount you want to give and ask your financial advisor to recommend stocks you own in a taxable account with appreciated value to gift.
- Transfer the stock “in-kind” to your charity of choice
- Receive an income tax deduction for your contribution.
- Use cash to buy back the amount of stock you have gifted (if you so choose) with a new tax basis, which means zero capital gains to start!
- Give to your favorite charities tax free or tax efficiently.
- Consider giving more with the extra money you saved.
Current Value of securities: $116,050 before tax
Original costs of securities: $50,000
Capital gains tax and CA State tax: 24.3%* on gains
Selling your securities and donating the proceeds
Donating your securities to Your giving account or directly to charity
Long-term capital gains tax paid
Charitable contribution (your charitable deduction)
Additional savings that can be dedicated to charity: $16,050
2. Qualified Charitable Distributions (QCD): QCD is a transfer of funds from your IRA custodian made payable to a qualified charity. You must be 70 ½ or older and certain rules and requirements need to be met.
- QCD can be counted toward satisfying the Required Minimum Distribution (RMD), but now it could be even more enticing to some givers due to the IRS Code’s higher standard deduction.
- QCD is reported as non-taxable income on the federal tax return. This may have two benefits: the QCD does not increase AGI and the QCD is not an itemized deduction thus an additional benefit to both itemizers and those taking the increased standard deduction.
3. Charitable Lumping and Clumping: The new tax law changes have increased the threshold for itemizing their deductions rather than just using the new standard deduction, which makes it more difficult for some annual givers to write off their charitable donations. Instead of losing this tax benefit for doing good, you can actually benefit from both itemized deductions and the increased standard deduction! Consider front-loading several years of giving into one year, itemizing in that year, and then claiming the increased standard deduction in the following years. For example, contribute a lump sum of two, three, four, or even five years’ worth of contributions to your charity of choice to allow you to take advantage of itemizing that amount in one tax year. It is also possible that your larger, one-time gift might also allow your charity to leverage your gift to a greater purpose than smaller amounts each year.
In the future, before you simply reach for your checkbook to support your preferred charity, consider the many tax smart giving strategies that could increase the benefit to both you and the charity!
Please consult a Chartered Advisor in Philanthropy or a financial advisor that’s well-versed in charitable giving strategies for more information.
We at Crown Wealth Management are passionate about helping our clients find purpose as they strive to “Live Abundantly. Give Generously.” As wealth managers, we strive to create innovative giving solutions customized for each family. You can call our office at 714-962-1800 for a complimentary consultation.
The tax smart giving strategies presented are examples based on current tax law and do not reflect a specific taxpayer situation. Tax benefits may differ from strategies presented. Please consult with your tax or financial advisor regarding your specific situation.
*This assumes all realized gains are subject to the federal long-term capital gains tax rate of 15% and California state tax of 9.3% and that the donor planned to sell the stock and contribute the net proceeds (the maximum long-term capital gains tax rate is 20% and the Medicare surtax is 3.8%, check with your tax advisor for your savings specific to your state tax and financial situation.)
**Gifting strategies illustrated will remove the asset’s ownership from the donor to the giving account or fund. This transaction does not include fees, trading costs or commissions. Total Cost Basis of Shares is the amount of money you have invested in the shares of an individual security or fund. The fair market value of the securities is considered long-term if it was held more than one year.
Securities America, Inc. a Registered Broker Dealer, Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc., a SEC Registered Investment Advisory Firm.
Crown Wealth Management, Inc., Christian Business Professional Directory and the Securities America companies are unaffiliated. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. The information is hypothetical in nature, provided for illustrative purposes only and does not reflect the performance of an actual investment or investment strategy. Andi Kang is Founder and President of Crown Wealth Management Inc., serving clients with significant assets who have a heart of philanthropy.
Contact us at: AKang@CrownWM.com, (714) 962-1800.