HOW SMART MONEY GIVES
With their retirement plan secure, Amir and Jen wanted to turn their attention to giving to one of their favorite charities. They owned some highly appreciated stock that wanted to sell so they could donate the cash.
We showed the giving couple, who are Maryland residents, alternative ways to give.
Give appreciated securities; save on taxes twice: If you have a stock, fund, or other investment (even real estate) that has grown significantly in value over the years, you can give it to a charity. If executed properly, when the charity sells the investment, they do not have to pay any taxes, and you get a full deduction for the gift, without paying tax on the gain.
Extra Maryland tax credits: there are several tax credit programs that will reduce what you owe the state if you gift under the terms of the program. The Community Investment Tax Credit Program, for example, provides a Maryland tax credit of 50% on top of federal and state income deductions. What does this mean? Make a gift of $1000 to an eligible charity, and under the program you get back $500 in a special Maryland tax credit PLUS the federal and state deductions. The net cost of that gift could be greatly reduced.
Do it at year-end. If you know this is a high tax year for you, it may make sense to make a gift near year end to reduce taxes. It’s also easier to keep track of those receipts when tax time comes in a few short months. However, when it comes to some tax credit programs, make your donation as soon as possible as there may be demand and limited credits available.
Get an income tax projection. Remember, that last contribution can actually take you down a tax bracket, so consider getting an income tax projection and giving to get a lower bracket.
Using these four principles, Amir and Jen were able to donate significantly more than they initially thought they could afford. Everybody’s situation is different, however, so please speak with your tax or financial advisor regarding your specific situation.
This case study is provided for illustrative purposes only.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.