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By Eric Davis, Treasurer/COO Arkansas Baptist Foundation
This article brings back two topics that have been mentioned many times in this column. The reason we keep rehashing these items is they work and aren’t as complicated as they sound. Also, my opinions are going to be prevalent throughout, but these opinions are based on many years of observations and experiences, working at ABF, and as a tax practitioner.
I believe that gifts of appreciated assets, and Qualified Charitable IRA Distributions (QCD) are the two most tax effective giving mechanisms for making significant contributions to your church outside of giving cash.
Gifts of appreciated assets:
This is regularly referred to as stock gifting but can be the gift of any appreciated asset you have owned for more than a year – Examples: real estate, virtual currency, etc. For simplicity, think of it as gifting shares of a stock you have held for many years. You purchased the shares for $1,000 years ago, and today, the same holding is valued at $25,000. If you were to sell those shares, you would pay capital gains taxes on the $24,000 gain.
Instead, you decide to donate the shares to your church. First, send the shares to us at ABF to save your church from the hassle of figuring out how to complete the transaction. ABF sells the shares and sends the proceeds to the church. All at no charge. You receive a charitable receipt for the donation (AT FULL MARKET VALUE!!!) of the shares. In the end, you do NOT pay taxes on the sale of the stock if owned for more than a year, AND you get a charitable deduction for the donation of the shares.
Stock gifting is where transformational gifts can happen. You are giving to your church out of wealth that has accumulated for many years and not just giving out of current income.
Qualified Charitable Distribution (QCD) from an IRA:
I am going to focus on the tax benefits of using a QCD as a giving method and not explain the eligibility requirements. In my opinion, there are two major benefits to donating using a QCD from your IRA.
The distribution from an IRA to your church is NOT taxable income. Please note, you do not get to deduct the contribution as a charitable contribution on your tax return. This is ok, because you are getting the benefit of not counting the income as part of your Adjusted Gross Income (AGI). With the higher federal standard deduction now in place, most people do not itemize on their federal tax return. Thus, they would not get to count the deduction anyway. I find this an incredibly beneficial tool because of the higher standard deduction.
By not being included in your AGI you are potentially receiving other benefits that aren’t typically considered. A lower AGI can help mitigate surcharges on your monthly Medicare premiums. Also, the One Big Beautiful Bill Act includes many tax breaks that phase out with a higher AGI. Most prominently, the $6,000 deduction for taxpayers 65 and older.
ABF can process QCDs, in addition to helping with stock gifting, so please reach out to us about these options.
Please consult your professional advisors to ascertain how these methods will impact your personal situation. The information contained in this article does not constitute legal or tax advice, and you should consult with your own legal counsel or tax counsel about your situation. If you have questions about this article or the Foundation’s services, please contact us at 501-376-4791, Ext. 5907 or [email protected].