Greetings! The S&P 500 has hit a new all-time high more than 50 times this year. The good news is that there is a way for you to avoid some capital-gains taxes, earn a substantial tax deduction and do a tremendous amount of good for the community you love: Consider using some of your highly appreciated stock to “bunch” several years’ worth of charitable gifts through a Donor Advised Fund at your local community foundation.
Let’s look at these pieces individually before seeing how they can work well together for your tax benefit.
First, when you donate publicly traded stock to a 501(c)(3) public charity, you generally avoid the capital-gains taxes that you would have owed Uncle Sam, and the charity doesn’t pay them either. Almost like magic, those taxes disappear, thereby allowing the entire value of your donated stock to support the charities you love.
Further, as the donor, you can normally claim a charitable tax deduction of the fair market value of the stock. That’s why donating highly appreciated stock is one of the most tax-efficient ways to give. You get the double benefit of avoiding capital-gains taxes and earning a tax deduction.
Second, “bunching” is a tax-planning tool in which you take the standard deduction during most years and bunch all of your deductions into a single year during which you claim a substantial itemized deduction.