For example, if your great-grandfather gave you 500 shares of Coca-Cola stock 50 years ago, the original cost basis of the stock is less than $1 per share. By donating these shares to your favorite nonprofit, that's a $20,000 donation that is exempt from all capital gains taxes.
If, however, the desire is to keep Coca-Cola stock in the family, a person can simply buy another 500 shares at today's price, which is approximately $40 a share. But now the cost basis for taxes on future gains is $40 per share instead of $1, which will translate into a major savings on capital gains taxes down the road.
For those looking for a long-term charitable-giving strategy, I have one more recommendation to consider.
Many business owners, professionals and corporate executives that have earned significantly more money this year compared to previous years are likely wondering: "How do I keep as much of my earnings as possible and still reduce my taxes?"
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Anyone in this position should consult with a financial advisor and consider setting up a donor advised fund. This charitable-giving tool enables donors to make a charitable contribution, receive an immediate tax benefit, and then give away this money to their favorite charities over time.
For example, a person can give $20,000 of cash or appreciated securities this year to a donor-advised fund and spread out the distributions to charities over several years. But by setting up the fund this year, they will receive a $20,000 deduction on their 2016 federal and state income-tax return.
I've seen the benefits to people in many communities from a comprehensive giving strategy. For people fortunate enough to make a good living and donate some of their earnings, a long-term strategy can help you achieve the twin goals of helping those who are less fortunate while reducing your income-tax bill.
— By Dave Polstra, co-founder and partner at Brightworth
This story is part of NBCU's Share Kindness. Follow the series on Facebook, Twitter and Instagram. #ShareKindness