Your Tax Dollars At Work
If you are considering gifting stocks to charity before the end of the year, a new calculator on fidelity.com lets you estimate the potential federal income tax benefit of donating long-term appreciated securities.
If you sell your securities and contribute the proceeds to charity, you will likely pay any associated capital gain tax.
Donating stick directly to charity, however, serves several purposes: you can potentially eliminate capital gains tax liability, give more to the charity of your choice, and lessen your overall income tax bite from uncle Sam.
Contribution of securities to the fidelity charitable gift fund allows the fund proceeds from the sale of the shares to be allocated to your giving account. It is then available for charitable giving purposes over time—allowing you to grant to multiple charities and have your contributions invested for growth.
Donations of securities to the gift fun have steadily increased over the past three years, to nearly 7% of total contributions. The stock donations to the gift fund peaked at 79% of total donations in 2000. “Gift Fund donors like the flexibility that the donor-advised fund provides—allowing them to donate a block of stock and then recommend grants to multiple charities” says David Giunta, president of the Gift Fund.
Check out the calculator by visiting fidelity.com/calculator. For more information on Fidelity’s charitable solutions, visit Fidelity.com/charitable or contact a Planned Giving Associate at 1.800.258.5759.
A qualified charitable organization you or your family establishes, typically through a substantial initial gift. The foundation may grant your public or private charities and even individual under certain circumstances.
Key Characteristics
· Tax deduction up to 30% of adjusted gross income for cash gifts 20% for appreciated assets.
· Control over investment management
· Needs to distribute at least 5% of assets each year
· Requires legal setup, ongoing maintenance, and compliance responsibilities.
· File IRS from 990-PF and pay excise tax on investment income.
· Family members may be employed or serve as board members, subject to certain guidelines.
Acontract with a not-for-profits organization, in which you provide a gift and, in exchange, the organization guarantees you income for life.
Key Characteristics
· Tax deduction based on your life expectancy and anticipated income stream
· Reduces capital gain tax liability for gifts of appreciated assets.
· Tax is due on a portion of the income stream
An irrevocable trust that generates an income stream for you or your beneficiaries, with the remainder of the donated assets eventually going to one or more qualified charitable organizations you select.
Key characteristics
· Tax deductions based on the value of the eventual gift to charity
· Income may be for life or for a fixed term of no more then 20 years
· Requires setup and ongoing maintenance costs
· Beneficiaries incur income tax liability on the income stream.
Acharitable trust established and maintained by a qualified charity, providing you or your beneficiaries a potential lifetime income stream based on a prorated share of the income earned by the fund. Remaining assets are eventually distributed to the charitable beneficiaries you have designated.
Key Characteristics
· Tax deduction based on your life expectancy and anticipated income stream
· Beneficiaries incur income tax liability on the income stream
· Professional investment management
· Simplified setup and record keeping
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