Giving Stock to a Educational Charity

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Giving Stock to a Educational Charity

Post by RadAudit » Mon Jun 29, 2020 1:28 pm

Really dumb questions.

I'm 73 and taking RMDs. Taxes and QCDs come out of the RMDs each year along with a smallish amount of money to supplement the budgeted SWR of ~3%+ inflation. For tax purposes, we (DW and I) file MFJ and use the standard deduction. Marginal tax rate is 22% for the Feds. Next year, my 50th from grad school graduation (Boolah. Boolah.), the class will hold a reunion and and push for donations to the school. I'm looking for the least expensive - tax wise - way of making a contribution from a tight budget.

What do I do?

1. Increase the QCD and try and find the the extra money for budgeted expenses from somewhere. MM in taxable?
2. Give mutual fund shares from taxable? I assume - hopefully, correctly - that a gift of the size I'm anticipating is not a taxable and not an IRS reportable event for me.
3. Of course, not giving more than the usual annual amount (a QCD) is also an option.
4. Other?
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Re: Giving Stock to a Educational Charity

Post by sport » Mon Jun 29, 2020 2:40 pm

The best way (tax wise) to make a charitable donation is with a QCD. If you do not wish to do that, the next best way is to give stocks with a long term capital gain. If you do not itemize, you don't get a tax deduction. However, you escape the tax on the gains.

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Re: Giving Stock to a Educational Charity

Post by aristotelian » Mon Jun 29, 2020 3:15 pm

Have you looked into a Donor Advised Fund? Long term you may find it useful to simplify donating stocks, plus you can bunch donations to itemize.

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Re: Giving Stock to a Educational Charity

Post by grabiner » Mon Jun 29, 2020 10:36 pm

If you take a $10K distribution from the IRA and make it a QCD, and sell $10K of stock with a $5K basis, you increase your income by $5K (which might be relevant for things such as IRMAA and the phase-in of Social Security taxation), and pay tax on that $5K at the capital-gains tax rate.

If you make a $10K withdrawal from the IRA and donate the stock to charity, you increase your adjusted gross income by $10K. If you were already itemizing deductions without the donation, you do not increase your taxable income (again, unless you hit the SS phase-in). If you were $5K below the standard deduction without the donation, you increase your taxable income by $5K, and that $5K is taxed at your full income tax rate.

Thus, if you would have to sell highly appreciated stock, and you are already itemizing deductions (with state taxes, mortgage interest, and other donations to charity), it is better to donate the stock and take the regular IRA distribution.

But if you are not already itemizing deductions, or if you can meet your living expenses by selling other taxable investments for little or no capital gain, or if you wouldn't need to sell the stock because the RMD plus dividends on your taxable account are more than you need to spend, then a QCD is better.
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Re: Giving Stock to a Educational Charity

Post by crefwatch » Tue Jun 30, 2020 6:17 am

If you are considering a gift of $25K, you could buy a charitable annuity, helping your tight budget a little, and get a partial tax deduction. This is not as much income as an SPIA because of the charitable component. But it addresses some of your issues.

When I did this it worked better to swap some VG fund shares for their ETF equivalent (no tax) and donate publicly traded shares. But Yale might be big enough to accept open-end shares.

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Re: Giving Stock to a Educational Charity

Post by BL » Tue Jun 30, 2020 6:46 am

I would think a QCD up to $100,000 would be the simplest and most straight-forward way. You can get a check in hand, do it later, or, I have heard, even arrange check-writing privileges on some funds for this purpose. There would be no taxes, just a line on 1040 with IRA withdrawal shown, but no taxable income.

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