Tocqueville Stock Donation
- Think beyond cash as a donation.
When making a gift, look at your portfolio with an eye towards donating long-term appreciated securities (stocks, mutual funds, bonds), real estate, private company stock (S-corp or C-corp) and other potential investments. Download directions to provide to your broker.
- Create a larger current year deduction by combining cash and securities.
While donating appreciated securities can eliminate long-term capital gains exposure, you are limited to only 30% of your adjusted gross income (AGI) for deducting contributions of long-term appreciated securities. It could take years to benefit from a larger current year deduction. In this situation, you may choose to supplement a charitable gift of securities with a charitable contribution of cash so that the maximum charitable contribution deduction limit of 50% of your AGI may be claimed. This strategic giving combination is an opportunity to reduce your taxable income.
- Take a multi-year approach toward deductions.
If your income is particularly high this year, perhaps as the result of a year-end bonus, or if you’ve sold a business, benefited from an inheritance or otherwise, consider that charitable contribution deductions may be carried forward for up to five years. You must claim the maximum deduction possible in the current year—the deductibility limits are 50% of AGI for cash and 30% for long-term appreciated securities—but then you can carry forward any unused charitable deductions for up to five more years. These carried-forward deductions must be used to the extent possible in the next tax year and are considered after any current year charitable contribution deductions. There can be power in front-loading in a high-income year.
- Make a charitable gift to offset capital gains through portfolio rebalancing.
Many savvy investors perform routine portfolio rebalancing to ensure that their investment mix is consistent with their goals. This can involve selling successful investments, which generates capital gains taxes in the process.
One simple offsetting measure is aligning your charitable giving with the re-balancing process. Instead of writing a check to charity this year, consider donating highly appreciated security, which you have held for over a year. Capital gains taxes typically will not apply to you or the charity receiving the donation, and because you didn’t write a check, you may have cash available to purchase more stocks as part of your re-balancing exercise.
Disclaimer: Before making any tax-related decisions you should check with your tax adviser regarding your specific legal and tax situation