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You’ve had a great year. Maybe that bonus was a little bigger than you were expecting. Maybe you got a higher commission or raise, or you’ve realized some gains from long-term investments. That could also mean that you’re heading toward a bigger tax bill than you were expecting.
But good news: there’s still time to make a meaningful donation to charity and become eligible for a 2016 charitable deduction. And of the many tactics for reducing your taxable income by giving to charity, some are particularly effective for off-setting a high income year:
Instead of writing a check, or selling non-publicly traded assets and donating the after-tax proceeds, it may be advantageous to donate long-term appreciated assets directly to a public charity. This strategy includes two often overlooked benefits: you'll generally be eligible for a tax deduction at the full fair market value, and because charities don’t pay capital gains taxes, you will be able to dedicate as much as 20% more to charity than had you sold the asset yourself.
A charitable gift that combines both cash and long-term appreciated securities may create a larger deduction than either one alone. When you donate cash, you may generally deduct up to 50% of your adjusted gross income. Donating publicly traded stocks, bonds or mutual funds that you’ve held for more than a year are generally deductible at fair market value, up to 30% of your adjusted gross income. It’s also possible to carryforward any unused deductions for up to five years.
“If you don’t have long-term appreciated securities and are nearing the December 31 deadline for contributions, cash is a great asset to consider”, says Brian Deacy, National Fundraising Manager, Fidelity Charitable.
Whether you choose to donate cash, stock or other appreciated assets, a donor-advised fund is a simple and efficient way to make a donation quickly and be eligible for a tax deduction this year. Rather than scrambling to decide where to give, and writing out checks or transferring stock to multiple charities, you can make a single donation to establish a donor-advised fund by the deadline. Then, you’re able to support any IRS-qualified public charity on the timetable that best suits you. And the fund can be invested for potential growth, giving even more money to charity.
This is a great strategy for people who may be thinking about retirement. By front-loading a donor-advised fund while you’re still in high income-earning years, you’ll be able to both get additional tax-savings when you need them—and pre-fund your charitable giving during retirement, when income may be lower.
Tax reform has been highlighted as a key priority for President-elect Donald Trump and Republicans in Congress. Our brief guide to potential tax reform can help donors make informed decisions about this year's charitable giving while considering possible changes in the tax code in future years.
When you’re ready to make your year-end contribution, consider a Giving Account at Fidelity Charitable, the largest donor-advised fund sponsor with a fully staffed team of in-house experts ready to get you started. Call us at 1-800-262-6039 or learn more about the Giving Account online. Then consider the following timetable to help you plan.
Please note that some assets take longer to accept and process than others. Call us with any questions on assets you are considering donating or the timing of your contribution.
Contributions must be received by December 31 to be effective for 2016. Please call us today so we can walk through the next steps to meet the December 31 deadline.
|Control and restricted stock|
|Mutual funds held outside Fidelity Investments|
|Public securities outside Fidelity Investments when contributed via Fidelity Charitable|
|Public securities outside Fidelity Investments when contributed via outside firm|
|Assets held at Fidelity Investments (contributed by mail)|
|Assets held at Fidelity Investments (contributed online, by fax or phone), checks, ACH, physical stock certificates|
Get all the date guideline details and information you need to make a contribution to Fidelity Charitable, including downloadable forms, our mailing addresses and more: Year-end tax date guidelines and details