What makes America great? This is a particularly important month to ask this question as two of the three pillars of America’s success are on the calendar.
First, there are the upcoming elections on Nov. 8 representing our country’s commitment to democracy.
Second, the Thanksgiving holiday on Nov. 24 represents the commitment to generosity. The third pillar, which both fuels and relies on the other two, is our economic system that has created tremendous value over the past couple hundred years.
Linking people’s economic success with their desire to be generous is one of the most professionally rewarding activities I’m involved in. Fortunately, you do not need a last name of Gates or Buffett to be able to make a meaningful impact!
A couple of worthwhile tools to consider for leveraging your financial impact to important organizations and causes include donating appreciated stock or direct donations from your IRA retirement account. Both of these strategies provide a mechanism to provide financial support while further reducing your income taxes beyond the traditional charitable deduction write-off.
If you have held appreciated stock outside of a retirement account for longer than a year, you can donate the shares instead of writing a check. While the charity still receives the same amount of money, you get to deduct the value of the donation plus you avoid paying income taxes on the gains. For example, if you bought a stock or mutual fund for $10,000 which is now worth $15,000 and donate it to charity, not only do you get the tax deduction for the full $15,000 but you also avoid paying tax on the $5,000 gain!
Another strategy that’s been around off and on for the past several years is the ability to making a donation directly from your IRA to a qualified charity. Congress finally made this a permanent law at the end of 2015 but it’s only for donors over the age of 70.5. By donating directly from your IRA, you avoid claiming the money as income which is usually the case for any distribution from an IRA. This can be especially helpful for calculating the amount of taxable Social Security benefits (which is based on your other income sources) or for people who don’t already itemize their deductions.
Author Claire Gaudiani has written several books about the pillars of America’s success with an emphasis on our generosity. Her book “Generosity Rules! A Guidebook to Giving” provides a brief look at the cycle of generosity that drives economic and social progress. For a more in-depth look at generosity in America, read her book “The Greater Good.”