DARKE COUNTY — Darke County residents are taking advantage of a robust stock market in 2017 to make gifts to local charities and achieve tax savings for themselves.
“We have many donors who give appreciated stock instead of cash because they can avoid capital gains taxes and receive a tax deduction for their contribution,” said Christy Prakel, executive director of the Darke County Foundation. The Foundation manages charitable funds that support scholarships to Darke County students and grants to local non-profit organizations.
Instead of selling stock to create a cash gift, smart investors are donating appreciated shares directly to charities like the Darke County Foundation, without the money passing through donors’ hands.
“We see a lot of activity in December as people try to reduce taxable income for 2017,” said Prakel.
An example Prakel gives is stock that originally cost $10,000 may now be worth $25,000. If a person sells that stock outright, he or she may incur thousands of dollars in capital gains taxes, thus decreasing the amount available to donate. If the person gives the stock straight to a charity, there is no capital gains tax, the charity receives the full $25,000, and the donor receives a greater tax deduction than if he or she had donated cash earned from the stock sale. Stock must be held for more than one year for a donor to deduct the fair market value of the donated stock.
Todd Durham, vice president and trust officer at Second National Bank, sees many clients benefiting from this donation technique.
“The donor maximizes his or her donation utilizing an asset that might otherwise remain held due to tax consequences,” said Durham, “and the donee receives donations from resources previously overlooked and untapped.”
Another cost-effective donation technique is for people over age 70½ to donate their required minimum distribution (RMD) directly from their retirement account to a charity. Donors may transfer up to $100,000 from IRAs to charity tax-free. The gift qualifies as the required minimum distribution for the year, but it is not included in the donor’s adjusted gross income, thus eliminating the tax on the RMD.
“Once a donor confirms the tax benefit via consultation with a tax professional, these are tremendous tools for use,” said Durham.
