Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.
Tuesday, November 29, 2016
ANOTHER YEAR-END TAX TIP – CONTINUE TO BE CHARITABLE!
Here is another year-end
tip for charitable giving, taken from my “2016 Year-End TaxPlanning Guide”.
Instead of giving cash to charity at
year-end you can donate stock, bonds or mutual fund shares that you have held
for more than one year and which have increased in value, and save some money
in the process.
You can claim a deduction for the
full market price of the investment on the date you make the donation.You don’t have to report the increase in
value as a capital gain on Schedule D.
Art Center has pledged $5,000.00 to
his church building fund.He also has 100
shares of Online Profits, Inc. which he purchased in 1998 for $2,000.00 and is
now worth $5,000.00.He decides to give
the stock to the church to satisfy his pledge.Art can deduct $5,000.00 on his Schedule A.He does not have to pay tax on the $3,000.00
appreciation in the value of the stock.
If Art were to sell the Online
Profits, Inc. stock and give $5,000.00 cash to the church he would have to
report the sale of the stock on Schedule D and pay $450.00 in federal tax, as
well as state income tax, on the gain.Plus, the $3,000.00 gain would increase his Adjusted Gross Income (AGI),
which could reduce or altogether wipe out a multitude of deductions and credits
that are affected by AGI.As an added
bonus, by donating the stock rather than selling it Art will save the broker’s
commission and other expenses of sale.
Any investment you donate to charity
must be long-term property - an investment you have held for more than one
year.If you donate stock that you held
for one year or less your deduction is limited to the cost basis, which in the
above example would be $2,000.00.
Also, do not donate an investment
that has gone down in value.It is
better to sell the stock, claim the loss on Schedule D, and donate the cash to