Charitable Giving - 5 Mistakes to Avoid - Part 3

By: Hammond Iles on March 20th, 2013

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Charitable Giving - 5 Mistakes to Avoid - Part 3

Wealth Management

By Greg Hammond, CFP®, CPA

Charitable giving provides benefits for the non-profit organization receiving the gift and for you.  You can free up additional funds for charitable giving by being more effective with your charitable donations   Are you currently giving in the most efficient and beneficial way?  Avoid these 5 common mistakes so you can give more and make a greater impact on the non-profit organizations and causes you care about.

3.  Donating an Investment Held Less Than One Year or That Has a Loss

As we stated in mistake #2, donating an appreciated investment, such as  a stock or mutual funds, can be a great way to save twice on your taxes with just one charitable gift.  However, you must have held the investment for a full year in order to deduct the fair market value.  If you have not held the investment for a year, you can only deduct what you paid for it.  In the previous example where you purchased a stock for $7,000 and donated it when it was worth $10,000, if you had owned the stock for less than a year, you would only get a charitable giving tax deduction of $7,000.

It is also a mistake to donate an investment that has lost value.  If you initially paid $12,000 for a stock that is now valued at  $10,000, you will only receive a tax deduction for the fair market value.  In this situation you are better off selling the stock, realizing the capital loss for your taxes and then using the proceeds to make the charitable donation.

Charitable Giving Mistakes - Part 1
Charitable Giving Mistakes - Part 2