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To Your Wealth - Seasonal Gifting Strategies Michael P. Haubrich,
CFP December, 2007 |
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I have
often thought that despite historical arguments to the contrary, it is fortunate
that Christmas is celebrated in late December. When you consider that our
winter climate is often less than ideal and daylight (to say nothing of
sunlight) hours are at a premium, this is often the time of the year when some
people are prone to depression. The business news media often sets the tone by
breathlessly reporting the daily retail sales figures as if they are a
harbinger of global commerce and market direction for the next ten years. Rather
than view the holiday season as a psychological and economic barometer, I
find it more uplifting to celebrate the Christmas message of hope and renewal
and extend the gratitude we express for good fortune at Thanksgiving. My
thoughts also turn to supporting causes and organizations that create reasons
for others to be thankful and rekindle their hope. The most
direct way to make a difference is to write a check. For contributions of
over $250, you need a receipt from the charity to be able to claim as itemized
deductions. For larger gifts, consider donation of appreciated assets like
stocks and real estate. This strategy provides a tax deduction for the fair
market value of the donations without recognizing the capital gains from a
sale. Avoiding the capital gains tax allows the donor to save up to fifteen
percent of an asset’s appreciated value. Assume
you own a stock that you acquired for $1000 several years ago that is worth
$11,000 today. Donating that stock to a charitable organization nets a tax
deduction of $11,000, while the charity may sell the stock and pays no
capital gains tax. Conversely, selling the stock and gifting the cash
proceeds triggers a taxable gain of $10,000 with the federal tax liability
being up to $1500 plus state income taxes (depending upon state of residence).
After paying the maximum capital gains tax, you would have $9500 or less left
for the charity. So donation of the assets leverages the amount of the gift available
to the charity. Another
gifting strategy that is now available to persons over age 70 ½ is giving
directly from IRAs. This benefits donors who do not have enough deductions to
itemize. It was the passing of the Pension Protection Act of 2006 that
ushered in this strategy. Unfortunately, this law has a two year life and
expires this December. The 2007 tax year will be the final time by which
taxpayers can transfer a tax-free portion of their IRA to charities, in
effect allowing gifting of funds that were never taxed. Donors can transfer
up to $100,000 per year from their IRA’s directly
to a charity and avoid paying taxes on the funds. The distribution counts
toward the required minimum distribution; but is not recognized as adjusted
gross income. Check
with your advisor about the feasibility of these strategies for you and your
circumstances. There are many other planned giving strategies also worth your
consideration that your tax advisor should be able to discuss. Be sure your charitable
goals are consistent with your values.
There are many deserving organizations worthy of your generosity. I want to
close by encouraging you to remember the organizations that make our community
a better place to live by supporting them financially. Check out the four
local organizations our company supports through our charity referral
program. They are Health Care Network (www.healthcarenetwork.org), Mike Haubrich is president of Financial Service Group, a
registered investment advisory firm in |