Nelson Roberts Investment Advisors has been committed to helping our local education system by sponsoring the Schoolhouse Rocks 5k for the fifth year in a row which benefits the Menlo Park Atherton Education Foundation (MPAEF). We encourage all of our clients who are philanthropically inclined to give to their charities of choice and offer strategies on how to maximize those gifts.

One great way to give back to charity while lowering your tax burden is gifting appreciated securities. This allows you to recognize a charitable deduction for the fair market value of the security and avoid paying taxes on the capital gain you would’ve paid if you sold the security and gifted cash. The benefiting charity receives a gift for the entire value of the security. This strategy can be extremely helpful with low basis stock. For example, if you received stock options which were exercised several years ago at $10/share and the stock is currently trading at $100/share, you can give 100 shares valued at $10,000 to a charity and avoid the $9,000 capital gain.

Clients who give to charity annually should consider the use of Donor-Advised Funds. The new tax code increased the standard deduction to $24,000 for a married couple filing jointly. This, combined with the cap on deductions for state and local taxes (including property tax) to $10,000, means far fewer people will be able to itemize their deductions. Donor-Advised Funds allow you to contribute stock for several years’ donations in one year and recognize the income tax deduction. You can then make the grant to charity at a later date. For example, if you normally give $5,000 to charity a year, you can donate $25,000 worth of stock to your Donor-Advised Fund in one year to take advantage of the tax deduction and then recommend $5,000 grants over the next 5 years.

Grandparents over age 70½ who are interested in giving to the MPAEF may consider using Qualified Charitable Distributions (QCDs). Instead of taking a Required Minimum Distribution (RMD) from your IRA and gifting cash to charity, you can make a direct transfer of an IRA balance up to $100,000 to a charity. This transfer avoids the funds from being included in your adjusted gross income (AGI) significantly lowering your taxes.

If you have any questions about gifting low basis stock, setting up a Donor-Advised Fund, or making Qualified Charitable Distributions, please contact us. For more information on how to donate to MPAEF, please visit https://mpaef.org/donate.

Individual investment positions detailed in this post should not be construed as a recommendation to purchase or sell the security. Past performance is not necessarily a guide to future performance. There are risks involved in investing, including possible loss of principal. This information is provided for informational purposes only and does not constitute a recommendation for any investment strategy, security or product described herein. Employees and/or owners of Nelson Roberts Investment Advisors, LLC may have a position securities mentioned in this post. Please contact us for a complete list of portfolio holdings. For additional information please contact us at 650-322-4000.