The stock market went on quite a run in 2017, up about 25% during the course of the year. Even more impressive, it essentially went straight up throughout the year, with very few minor dips along the way.
The historic run-up has left many investors with significantly appreciated stock holdings. That, of course, is what we all hope for when we buy stock. There is one downside, however: the appreciation is subject to capital-gain tax when the stock is sold.
There is a very effective strategy to avoid tax on that gain for those with philanthropic plans. If you use long-term appreciated securities to fund your charitable plans, you can realize a deduction for the full fair-market value of the stock and you do not have to report any of the appreciation as taxable capital gain.
First, make sure you have owned the stock for more than one year. This is what makes your gain “long-term” and eligible for this special treatment when you use it to make charitable gifts.
You can avoid realizing gain on all outright gifts of long-term appreciated stock and on many kinds of income-producing gifts as well. We welcome the chance to discuss with you and your advisors what kind of gift might work best for you.
If you are considering making a large gift in 2018, provisions in the new tax law just passed may provide additional benefits for you. Under the new law you now can deduct gifts up to 60% of your contribution base—basically your adjusted gross income—for cash gifts. Gifts of appreciated property have a lower maximum. As in past years, any amount of your deduction that exceeds the maximum allowable in any one year can be carried forward and used for up to five additional years.