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Discuss Latest WCI Blog Post: Tax Benefits of Donating to Charity

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  • PhysicianOnFIRE
    replied
    Originally posted by EntrepreneurMD View Post

    Thanks. Good information.

    As a not-for profit, does the recipient have to pay taxes on the appreciated shares or not, or is there some sort of step-up basis? Making sure it doesn't diminish the amount they have available to do their work is more important than my tax benefit, given the nature of the work they do so I'm not willing to diminish their benefit to optimize mine if that's the case. It would be great if there is benefit for both sides.
    Essentially, there's a step up in cost basis upon transfer. You don't pay any capital gains taxes, and neither does the recipient. You want to donate your most highly appreciated shares (by percentage) if you can.

    Leave a comment:


  • artemis
    replied
    Originally posted by EntrepreneurMD View Post
    As a not-for profit, does the recipient have to pay taxes on the appreciated shares or not, or is there some sort of step-up basis?
    That's the beauty of donating appreciated shares: neither the donor or the charity pay taxes on the donation.

    Leave a comment:


  • EntrepreneurMD
    replied
    Originally posted by PhysicianOnFIRE View Post

    In 2020, there's a one-time rule allowing you to donate 100% of your AGI if you donate in the form of cash.

    I prefer to donate appreciated assets to flush the capital gains out from my brokerage account. When you do that, you're limited to 30% of AGI. But, yes, I would start this year with a DAF by donating appreciated shares of whatever stocks or fund lot(s) you own that have the highest percentage gains.

    Do this for a few years and you'll have your 7 figures donated. You might also take some years off and just take the standard deduction on your 1040, but you can still donate six figures from the DAF.

    WCI and I wrote a pro / con on donor advised funds.. I think I won.
    Thanks. Good information.

    As a not-for profit, does the recipient have to pay taxes on the appreciated shares or not, or is there some sort of step-up basis? Making sure it doesn't diminish the amount they have available to do their work is more important than my tax benefit, given the nature of the work they do so I'm not willing to diminish their benefit to optimize mine if that's the case. It would be great if there is benefit for both sides.

    Leave a comment:


  • PhysicianOnFIRE
    replied
    Originally posted by EntrepreneurMD View Post

    Would you recommend this for around 6 figures/year in donations or do you just leave someone in this situation donating in the traditional way since the first $14.8K is only14.8% of annual donation? No mortgage (interest). Annual property taxes paid >$10K. No state income tax. Five years would be around $500K donations.

    Also, I know of a cardiologist that donated his entire last year of annual income before retirement. I highly respect that, so I am considering doing this. It would be 7 figures in 1 year (after taxes), today's dollars. What would I do to plan accordingly if anything? Thanks!
    In 2020, there's a one-time rule allowing you to donate 100% of your AGI if you donate in the form of cash.

    I prefer to donate appreciated assets to flush the capital gains out from my brokerage account. When you do that, you're limited to 30% of AGI. But, yes, I would start this year with a DAF by donating appreciated shares of whatever stocks or fund lot(s) you own that have the highest percentage gains.

    Do this for a few years and you'll have your 7 figures donated. You might also take some years off and just take the standard deduction on your 1040, but you can still donate six figures from the DAF.

    WCI and I wrote a pro / con on donor advised funds.. I think I won.

    Leave a comment:


  • EntrepreneurMD
    replied
    Originally posted by Steven Podnos MD CFP View Post
    For clients with regular charitable donations of at least several thousand dollars a year and no mortgage interest, we often recommend "bunching" several years of planned giving to a Charitable Gift Fund. For many of our clients without mortgage interest, their schedule A deductions are limited to the 10K of State/Property tax deduction plus charitable donations. This means that the first 14.8K of charitable donations won't exceed their standard deduction. For example, a family that donates 10K per year to charity might contribute 50K in one year (hopefully with appreciated stock investments) and get at least a 35K Schedule A deduction instead of zero.
    Would you recommend this for around 6 figures/year in donations or do you just leave someone in this situation donating in the traditional way since the first $14.8K is only14.8% of annual donation? No mortgage (interest). Annual property taxes paid >$10K. No state income tax. Five years would be around $500K donations.

    Also, I know of a cardiologist that donated his entire last year of annual income before retirement. I highly respect that, so I am considering doing this. It would be 7 figures in 1 year (after taxes), today's dollars. What would I do to plan accordingly if anything? Thanks!

    Leave a comment:


  • Steven Podnos MD CFP
    replied
    For clients with regular charitable donations of at least several thousand dollars a year and no mortgage interest, we often recommend "bunching" several years of planned giving to a Charitable Gift Fund. For many of our clients without mortgage interest, their schedule A deductions are limited to the 10K of State/Property tax deduction plus charitable donations. This means that the first 14.8K of charitable donations won't exceed their standard deduction. For example, a family that donates 10K per year to charity might contribute 50K in one year (hopefully with appreciated stock investments) and get at least a 35K Schedule A deduction instead of zero.

    Leave a comment:


  • GorillaDO
    replied
    If I wanted to start a small scholarship fund privately thru my alma mater high school, so I can personally control and pick the scholarship winner and have more control over where the money is going, would that be considered a charitable donation?

    Leave a comment:


  • EntrepreneurMD
    replied
    Beyond tax breaks, a better ROI than any other investment I will ever make. Nurture the soul. Pay it forward. I know I don't deserve that which was given to me, so I never really think of all of it as mine.

    Leave a comment:


  • Discuss Latest WCI Blog Post: Tax Benefits of Donating to Charity

    Become a better person and get valuable tax breaks by donating to charity. Donate directly, with a donor-advised fund, a foundation, or a trust.

    The post Tax Benefits of Donating to Charity appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.



    Click here to view the article!
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