Top 3 Ways to Give to Charity Before Year End

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Top 3 Ways to Give to Charity Before Year End

Saturday, November 21, 2015

It's hard to believe that 2015 will be coming to an end in less than two months. The holidays are just around the corner. Before you pull out the champagne to ring in the new year, MSMS Foundation offers a few quick and easy ways to make charitable contributions before year end.

Cash

This is the easiest and most straightforward way to give. It's self explanatory: you write a check to the charity. However, it might not be the most optimal choice from a tax perspective. You may have a couple of better options.

Highly Appreciated Stock

Using highly appreciated stock is a great alternative to gifting cash. The appreciated shares have a low cost basis and a lot of gain. If you gift the highly appreciated shares you're able to deduct the full fair market value of the shares, subject to Adjusted Gross Income (AGI) and phase out limitations. The charity then sells the shares and doesn't have to pay taxes on the sale because of its tax-exempt status. This is a win for you and for the charity.

Let's look at an example. Let's say you have 100 shares of stock in your trust. You bought the stock for $2 per share and today it's worth $10 per share. If you donate the 100 shares, you would be able to deduct $1000, subject to AGI and phase out limits. The charity can sell the 100 shares of stock and will still net $1000 because they don't have to pay taxes on the gain. If you sold the shares and then donated the cash, you would have to pay capital gains tax on $800 of gain. To be in the same economic position, you would either have to give less to the charity or donate more to accomplish the same $1000 gift.

What's Going on with the Qualified Charitable Distribution

The Qualified Charitable Distribution (QCD) has lapsed for 2015. Historically, the QCD allowed you to use your Required Minimum Distribution (RMD) to make a donation directly from your IRA to a charity. The income was not included in AGI, which is advantageous from a tax point of view. Unless Congress takes action, people who are 70 ½ years old must take a required minimum distribution (RMD) from their IRAs. These RMDs are included as "above the line" income, and they increase AGI. Your AGI impacts many other credits, deductions, Medicare premiums, and the taxation of Social Security.

While the final fate of QCD is unknown for 2015, making a gift to a charity using your RMD could still make sense. If the law passes at the last minute like previous years, you get the benefit of simplicity and a lower AGI for the year. If the law doesn't pass, your RMD will still be included as income and the charitable gift is deductible. You are no worse off than if you wrote a check to the charity.

A Few Things to Keep in Mind:

  1. Confirm that the charity is qualified. Only contributions to IRS qualified charities are tax-deductible, subject to a percentage of AGI. If you are unsure if you charity is qualified, ask them or the IRS.
  2. Work with a CPA to determine your deductibility limits and potential phase outs.
  3. Be sure to specify if you want the gift to be added to the general fund or if you like it to go to a specific project or cause.
  4. Get a receipt for your gift. For contribution greater than $250, you must have an acknowledgement of your gift from a qualified organization.

As the Foundation for physicians by physicians, the MSMS Foundation's primary purpose is to advance the field of health for the public good and to function as the umbrella organization for the MSMS Center of Physician Education and Leadership. The Foundation's philanthropic focus is to support projects and activities that are meaningful to the medical profession, including the following:

  • Making the practice of medicine and the healthcare system better
  • Ensuring the provision of good patient care
  • Supporting the practice of tomorrow, new physicians and the development of physician leadership
  • Supporting community-based projects that engage physicians and community leaders

To make your 2015 contribution, please visit msms.org/Foundation.

Having a clear financial roadmap that integrates your charitable goals is critical in helping you make smart decisions with your money. Contact WealthCare Advisors to put your plan into action.