Caterpillar Employees are Able to Donate Stocks To Charity. Let's Take a Look at the Benefits of this Strategy

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For Caterpillar employees nearing Retirement - giving appreciated stocks can help you save taxes while giving back to causes that matter - using strategies like donor-advised funds can make The process easy and impactful - says Wesley Boudreaux, of The Retirement Group, a division of Wealth Enhancement Group.

'Caterpillar retirees can give more by donating appreciated equities or by strategically lowering taxable income and reducing Medicare premiums - work with an advisor to do this,' says Patrick Ray of The Retirement Group, a division of Wealth Enhancement Group.

In this article we will discuss:

1. The Impact of Appreciated Stock Donations.

2. The Tax Advantages of Donating Stocks.

3. Increasing Charitable Contributions through Donor-Advised Funds and Qualified Charitable Distributions.

You might find yourself giving back to a cause that is personally meaningful as you make your way to financial security and retirement. Philanthropy also gives you purpose during your retirement years. If you are considering giving to charity, consider using a strategy that is often overlooked: volunteering, donating appreciated stocks. It examines the tax advantages and best practices for giving equities to charities.

The Influence of Appreciated Stock Donations:

Almost everyone who gives to charities usually gives money - even Caterpillar employees. But donating appreciated stocks may be a potent and tax-efficient alternative if you are a Caterpillar employee about to retire or if you are already retired.

Stock Donations Have Tax Advantages:

Giving stocks to a charity can provide several tax benefits. You can first deduct the shares' fair market value as a charitable contribution on your tax return. This means if your equities have appreciated since you bought them, you will pay a deduction greater than the amount you originally paid for the shares. Second, you avoid paying capital gains tax on the stock's appreciated value, which you would have paid had you sold the equities for cash.

An example would be:

You bought 100 shares of XYZ Company for $10 a share in 2015 for $1,000. Today a share is worth $20, so your investment is worth $2,000. Sell these shares and you will pay capital gains tax on the gain but if you give them away you can deduct their fair market value of $2,000 from your income.

Limits and Deductibility:

Know the limits on how much appreciated stock can be deducted as a charitable contribution. Through this process you can usually deduct at least 20% of adjusted gross income (AGI). But some circumstances allow larger deductions. For example, you can deduct 50 percent of your AGI when donating to churches, educational institutions, hospitals and private operating foundations.

Choosing the Right Stocks to Give Away:

If you have a few equities that have appreciated and are unsure which one to donate, pick the stock that has appreciated the most. Donating the most appreciated stock maximizes the benefits to the charity and your tax advantage.

Streamlining the Process with a Donor-Advised Fund:

A donor-advised fund may be a smart move for those who want to make regular stock donations part of their charitable contributions. You can donate shares you wish to donate to a donor-advised fund and at your discretion distribute the donations to multiple charities. When you transfer the stock into the fund - regardless of when the shares are transferred to the charities - you can take the charitable deduction.

IRA Distributions Can Be Leveraged for Charitable Giving:

Those Caterpillar retirees who are required to take minimum Distributions from their IRA or retirement account can take advantage of Qualified Charitable Distributions (QCDs) or charitable IRA rollovers to increase their Charitable contributions. You can reduce your adjusted gross income by having your IRA administrator send up to $100,000 of your RMD directly to a charity - IRA distributions are generally taxable. No tax deduction is available for this charitable contribution, but your lower AGI may allow you to take other deductions or credits.

Stock Donation Tips:

Donate publicly traded stock instead - it takes less documentation. It is best not to donate equity in master limited partnerships or other publicly traded partnerships because of possible complexities.

As you near retirement and think of ways to give back, consider donating appreciated stocks to charities. The tax advantages of deductions and avoiding capital gains taxes can add value to your charitable contributions and your own financial standing. Understand limits on deductions and explore strategies like donor-advised funds and Qualified Charitable Distributions to maximize your retirement contributions while making a difference in the world. Remember that the joy of philanthropy is as much in giving as in impacting those in need.

A study in the Journal of Financial Planning in June 2023 suggests donating appreciated equities may help high-income retirees offset the Medicare surcharge. Caterpillar retirees could lower Medicare premiums by reducing adjusted gross income (AGI) through direct stock donations to charities. This new insight should help our 60-something target audience - Caterpillar employees entering retirement - to manage healthcare costs while donating appreciated equities in tax-efficient ways.

During retirement, give back with appreciated stock donations. Read how stock donations lower your taxes and allow you to deduct the fair market value on your tax return. How to maximize your charitable contributions as a Caterpillar employee or retiree by selecting the best equities and starting a donor-advised fund. Learn about the tax advantages of QCDs from your IRA - like a lower adjusted gross income and lower Medicare premiums. Donating publicly traded securities streamlines the procedure and helps philanthropic work. Check out the power of stock donations - Get started today.

Donating appreciated stocks is like planting a philanthropic tree that bears fruit and provides a tax shelter. Just as a well-kept tree develops and benefits over time, donating stocks provides long-term benefits for Caterpillar retirees and those entering retirement. By sowing the seedlings of appreciated stocks, you plant a path to large tax deductions and avoidance of capital gains taxes, like tending to a fruitful tree. Just as a mature tree shelters and feeds those around it, donating stocks also improves your financial picture by reducing your adjusted gross income and - possibly - managing your Medicare costs. Take a leap of faith with stock donations for a prosperous trip toward meaningful philanthropy and an enjoyable retirement.

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Added Fact:

Data from a survey by Fidelity Charitable in 2023 show that more high-net-worth individuals - including Caterpillar employees and retirees - are using donor-advised funds (DAFs) to manage their Charitable giving. The research found that DAFs are a nebulous tool for philanthropy - donors can contribute appreciated assets like stocks and receive immediate tax benefits while recommending grants to their chosen charities over time.

That fits in with the article's focus on donating appreciated stocks:

DAFs are a useful tool for managing and maximizing charitable contributions in retirement - and are especially relevant to our 60-something target audience looking for meaningful ways to give back while optimizing their money.

Added Analogy:

Giving appreciated stocks to charity is like planting a financial tree in your retirement garden. Just like a well-kept tree bears fruits and shelters from taxes and the capital gains storm, donating stocks supports meaningful causes as well as shelters from taxes and the capital gains storm. Sowing the seeds of appreciated stocks produces big tax deductions and a smoother financial landscape, like planting a fruitful tree that will bear fruit for years. Just as an expert gardener tends to his garden with care and precision, you can manage your philanthropy with strategic donor-advised funds so you can donate stocks effectively and enjoy the rewards over time. Accept the power of stock donations as you journey toward impactful philanthropy and a comfortable retirement 'like a gardener tending an orchard.'

Sources:

1. Fidelity Charitable . 'Donate Stock to Charity.'  Fidelity Charitable , 2023,  www.fidelitycharitable.org/giving-account/what-you-can-donate/donating-stock-to-charity.html .

2. BlackRock . 'Donate Stock to Charity for Bigger Tax Savings.'  BlackRock , 2023,  www.blackrock.com/us/financial-professionals/insights/donate-stock-to-charity-for-tax-savings .

3. William Blair . 'Gifting Appreciated Securities to a Donor-Advised Fund Program.'  William Blair , 2023,  www.williamblair.com/Insights/Gifting-Appreciated-Securities-to-a-Donor-Advised-Fund-Program .

4. TIAA . 'Maximizing Tax Benefits Through Strategic Charitable Giving.'  TIAA , 2023,  www.tiaa.org/public/retire/services/preparing-for-retirement/giving/charitable-giving .

5. First Tech Federal Credit Union . '5 Benefits of Donating Appreciated Stock.'  First Tech Federal Credit Union , 2023,  www.firsttechfed.com/articles/invest/benefits-of-donating-appreciated-stock .