Financial Focus: Three factors to consider when making charitable gifts

The holiday season is here, which means gift-giving is probably on your mind. In addition to making gifts to your family and friends, you also may be interested in contributing to charitable organizations. But before you donate financial assets, such as stocks, you will need to consider several factors, including taxes, your portfolio balance and the reputation of the charity. Let’s look at these areas:

Taxes — Your donations to qualified charities (those that are considered 501(c)(3) organizations by the Internal Revenue Service) can give you tax deductions — if you itemize deductions on your tax return. However, due to recent tax law changes, the standard deduction for 2018 has almost doubled, to $24,000 for married couples, and to $12,000 for single filers. As a result, you may be less likely to itemize deductions, so you could have less incentive, at least for tax reasons, to make charitable gifts. However, if you give appreciated stocks, you may be allowed a charitable deduction for the full fair market value of the gift on the date of the transfer, even if your original cost was only a fraction of today’s value. Plus, you may not be subject to the capital gains tax you might have to pay if you eventually sold the stocks.