My wife was born on the 4th of July — a big day of celebrations and traditions important to my family. I love our country and I love Uncle Sam, but one of my favorite things is helping clients find ways to keep him out of their wallets any more than he already is.
Are you charitably inclined? Do you regularly support your house of worship or favorite causes? Do you also have investments in non-IRA accounts that have appreciated significantly? Why not give your charity those appreciated investments?
Say you were planning to give a non-profit $1,000. You could write them a check — you’d get the potential tax deduction, and the charity gets the funding. Or you could give them $1,000 of stock or mutual fund shares you paid only $300 for. You’d still get the $1,000 potential deduction, and the charity sells the shares for the cash they need. But the $700 of gain never gets taxed — the non-profit pays no capital gains tax, and since you gave the shares away, neither do you.
If you then replace those shares with the $1,000 cash you would have given anyway, your portfolio is right where it was, but ready to send you a smaller tax impact when you sell later — say, at retirement. There are many specifics that make this work or not, so please give us a call or talk to your tax advisor to see if it fits your case.