Impact Your Community Through Charitable Giving

By Joanne Humphrey, CPA, PFS

As we approach the end of the 2017 tax year, you may be thinking about reducing your taxable income through charitable giving. The philosophy of Giving While Living suggests two ways you can make an impact in your local community with those gifts.

Gifts of Appreciated Stock or Property

Consider gifting appreciated securities or other property in 2017. Rather than selling the stock or other property, paying the capital gains tax and then making a donation from the proceeds, consider gifting the actual asset. You will be able to deduct the full fair market value of the asset without paying taxes on it first.

There are limitations on the contributions you can deduct on a yearly basis — typically 30 to 50 percent of your adjusted gross income. If your gifts exceed these limits, you can carry the excess over to the next five years.

Here’s an example based on a stock valued at $50,000 with a $5,000 basis showing an increased tax benefit of $3,672:

Stock Sold + Then Gifted Stock Gifted to Charity
Stock Sale Proceeds $50,000
Taxes on Sale (15% + 9% on gain of $45,000) (10,800)
Gift to Charity – cash or stock $39,200 $50,000
Tax Savings on Charitable Deduction (25% + 9% tax rates) $13,328 $17,000


Qualified Charitable Distributions Made Through Your IRA RMD

Individuals age 70 ½ and older can instruct their IRA trustee to make qualified charitable distributions of up to $100,000 per year directly to a qualified charity. These contributions count towards your required minimum distribution but do not raise your adjusted gross income. This can reduce your adjusted gross income when considering the taxability of your Social Security benefits or other limits on your itemized deductions. Qualified charitable distributions can only be made from regular or Roth IRAs and not from pensions, 401K accounts or ongoing SIMPLE and SEP plans.

Potential Tax Law Changes and Contributions

The House and Senate versions of the potential tax reform both leave in the deduction for charitable contributions. However, you should still consider front-loading any large gifts in 2017. With the proposed reduced income tax rates, potential itemized deduction changes to state income, real estate and medical deductions and the increased standard deduction, the value of the tax deduction from your donation may decrease in the coming years.

Giving While You’re Living

Rather than dribbling out small gifts each year, Chuck Feeney, founder of The Atlantic Philanthropies and champion of Giving While Living, promotes opening the charitable giving spigot wide with “bold bets, big checks, [and] dramatic impact.” This approach to philanthropy can greatly influence change while the donor is still alive and be of greater value to both the donor and the nonprofit organization.


Joanne has over 30 years of experience providing business advisory and tax services, including complex tax preparation and planning, trust and estate planning, retirement planning, and financial planning, for  business owners.

Connect with Joanne here.

Aldrich Wealth, LP, (“Aldrich Wealth”) is an investment advisor registered with the U.S. Securities and Exchange Commission. Aldrich Wealth Advisors provides wealth management services where it is appropriately registered or exempt from registration and only after clients have entered into an Investment Advisory Agreement confirming the terms of the client relationship, and have been provided a copy of Aldrich Wealth ADV Part 2A brochure document. The information contained in this document is provided for informational purposes only, is not complete, and does not contain material information about making investments in securities including important disclosures and risk factors. Under no circumstances does the information in this document represent a recommendation to buy or sell stocks, bonds, mutual funds, exchange traded funds (ETF’s), other securities or investment products.

The technical information in this newsletter is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.