Hey there, dear readers!
Last time we delved into the realm of Donor Advised Funds (DAFs) and their magic in the tax world. Today, we’re diving a bit deeper. Imagine a way to amplify your charitable impact while also navigating around capital gains tax. Intrigued? Let’s talk about funding your DAF with appreciated stock.
Traditionally, when we think of charity, we think cash donations. But here’s the beauty of DAFs – they offer versatility. And for those with investments that have seen substantial growth, this is a game-changer. Here’s why:
1. Side-stepping Capital Gains Tax: When you sell appreciated stock, you typically owe capital gains tax on the profit. But if you donate this stock to your DAF, you bypass that tax entirely. It’s a win-win: You avoid a tax hit, and the full value of your stock goes toward causes you care about.
2. Immediate Tax Deduction: Just like with cash contributions, you receive an immediate tax deduction for the market value of the stock when you donate it to your DAF.
3. Strategic Selling: Once inside the DAF, the fund can sell the stock (also without incurring capital gains tax) and reinvest the proceeds, creating a larger pool of assets ready for your philanthropic aims.
Think of it as an alchemy of assets. By using appreciated stock instead of cash, you’re making the most of your investments, both in terms of maximizing their value and furthering their societal impact.
Remember, as thrilling as these strategies sound, always liaise with your financial advisor or tax professional before making a move. The intersection of investments, tax benefits, and charitable giving is a powerful one, but it’s crucial to get it right.
Join me next time as we explore more avenues to blend your financial savvy with a heart for giving.
I like to think of this as “strategic generosity” and it is one of my favorite things to help clients implement.
