For some taxpayers, the IRS makes a donation very painless. In the example below, we use a hypothetical taxpayer with an estate above $1 million, an estate tax rate of 45%, and a 35% combined federal and state tax bracket.
Our investor owns some shares he bought 30 years ago. He paid $10,000, and the shares are now worth $100,000. He won’t sell the shares because of the high capital gains tax. So he looks at the numbers of simply donating the shares to his favorite charity:
Charitable tax deduction
$100,000 x 35% tax bracket = $35,000
Estate Tax Reduction
$100,000 x 45% bracket = $45,000
Total Tax Savings = $80,000
Therefore, by giving $100,000 of appreciated stock, our investor and his beneficiaries get $80,000 in tax savings from the IRS. So the gift really costs only $20,000 ($100,000-$80,000).
If you have any desires to make charitable gifts soon or in the future through your will or trust, we can show you how to get the best tax savings advantage now. Just return the enclosed coupon for more information.