Charitable Giving + Tax Savings

‘Tis the season for giving (and end-of-year tax planning)!Best practices for portfolio management suggest that you should review your portfolio every year or so to see if it should be rebalanced. Spoiler alert: After a huge run-up in the stock market this year, there’s a good chance your portfolio is now overweight stocks.Generally speaking, if you sell stocks in a taxable account in order to rebalance your portfolio, you’ll owe tax on the difference between the purchase price and the sales price. This is called “capital gains tax.” Whether capital gains taxes are paid sooner (as a result of rebalancing your portfolio), or later (as you sell the assets in retirement), they will eventually come due if you plan to use the assets during your lifetime.But there is a way to avoid paying capital gains tax while perhaps getting a nice deduction on your 2017 tax return.By donating appreciated shares of stock directly to a charity -- instead of selling stock first and then donating the cash proceeds -- you will avoid ever having to pay tax on the capital gain. Once the charity receives your donated shares, they sell the stock and keep the proceeds. The value of the appreciated shares is the amount of your charitable deduction. It’s a win-win.If this is something you’re interested in, call your broker or advisor to request a stock donation form. Your deadline is 12/31/2017 if you want the deduction for tax year 2017.Please note that Congress is considering changing the tax laws next year to reduce this tax benefit, so this strategy might not be as valuable in the future.