6 ms·

Reminds me to donate to Signal again

artificialLimbs 5y ago
I don't want to do that regularly so I signed up for an automatic donation subscription. https://signal.org/donate/ https://signal.org/donate/
AlbertCory 5y ago
Speaking of donations (a guy from a food bank whom I see in the Safeway parking lot didn't know this, so I think we can assume not everyone does): Most "donate" pages do not allow for "donor-advised funds (DAF)." They assume you're giving it with your before-tax money and presumably taking a tax deduction for it. In a DAF, which your financial institution surely offers, you can donate appreciated assets, e.g. your FAANG stock, and take the entire amount as a tax deduction. So if your 10 shares of Facebook (excuse me, "Meta") stock are at 322, you can take a deduction of $32,200 this year. What's the catch? That money's gone, and you can't get it back. You can only "advise" your DAF to give it to a 501(c)(3) organization, which Signal is. There are no time limits. The good part, though, is you can probably have your DAF give the money anonymously, so the charity can't bug you every time they're having a fund drive.
- ndesaulniers 5y ago
  Another benefit, it sounds like, is that you don't have to pay capital gains on selling those shares. Like, let's say your intent is to donate $10k to some charity, out of the goodness of your heart and/or as a tax write off. You don't have that in cash, but do in stock. You could liquidate $10k of stock, pay capital gains on it (if it appreciated since acquisition), then donate it. So you're out the capital gains tax. The method you describe seems more efficient, since you don't need to sell; you simply transfer ownership of the asset. Or is there still capital gains to be paid? I wonder if billionaires are setting up charities as trusts for their kids, then "donating their shares to charity?"
  - palmtree3000 5y ago
    You indeed don't have to pay long term capital gains tax, although you do have to pay short term capital gains tax.
    - loeg 5y ago
      No? Donations of stock to DAFs are not taxed and the full amount is deducted.
  - AlbertCory 5y ago
    You're exactly right, you don't pay capital gains tax, and DAFs really are the poor man's "tax-exempt foundation." Billionaires have access to much fancier schemes than this, and I won't even attempt to describe all those. But yeah, I imagine "donating their shares without capital gains taxes" figures into them. I just noticed you said "trusts for their kids" -- that's something different. If the children can access it, it's not a DAF. But trusts are much more complicated, and someone who understands them (which I don't) can hold forth here.
    - jonas21 5y ago
      Yeah, I didn't realize what an enormous difference this made until I ran the numbers. In your example above, let's say the person purchased those 10 Meta shares for $38 each at the IPO and they're worth $322 each now. That's $3220 in proceeds and a $2840 capital gain. The taxes on this depend on income level and state of residence, but let's say they're in CA making $300K/year. They'll pay 20% federal capital gains tax + 3.8% net investment tax + 10.3% CA income tax, or $968 in taxes, and they're left with $2252. On the other hand if they donate the shares to a charity (or DAF), they get a tax deduction for the appreciated amount ($3220), which can be taken against 35% federal income tax + 10.3% CA income tax = $1459. So in the scenario where they just sell the shares, the proceeds after taking taxes into account are: Donor $2252 Charity $0 And in the scenario where they donate the shares, they are: Donor $1459 Charity $3220 In other words, for an effective cost to the donor of $793, the charity gets $3220.
- deleted 5y ago
  [deleted]
- loeg 5y ago
  Yeah, with a DAF you have the administrator cut a check to the qualified beneficiary. Also, the annual stock deduction limit is capped at 30% or so of income.
- AlbertCory 5y ago
  While we're on the topic: you can also leave your estate to a DAF. (If you're married or have kids, probably you should ignore this.) So that money goes to charity, but what charities? You won't be here, obviously. When you're looking into this, see if your DAF administrator allows a "successor trustee." If not, that institution itself (Schwab, Vanguard, whatever) will disburse it. If they do, you can pick someone whose values you trust to be the successor & disburse the money. (Probably someone younger than you!) You should ask them, or else they'll get a real surprising phone call right after you die.
- mmoskal 5y ago
  You can also do it with major crypto tokens. At least with Fidelity Charitable. You get to deduct the market value and don’t pay capital gains.

I don't want to do that regularly so I signed up for an automatic donation subscription. https://signal.org/donate/ https://signal.org/donate/

AlbertCory 5y ago

Speaking of donations (a guy from a food bank whom I see in the Safeway parking lot didn't know this, so I think we can assume not everyone does): Most "donate" pages do not allow for "donor-advised funds (DAF)." They assume you're giving it with your before-tax money and presumably taking a tax deduction for it. In a DAF, which your financial institution surely offers, you can donate appreciated assets, e.g. your FAANG stock, and take the entire amount as a tax deduction. So if your 10 shares of Facebook (excuse me, "Meta") stock are at 322, you can take a deduction of $32,200 this year. What's the catch? That money's gone, and you can't get it back. You can only "advise" your DAF to give it to a 501(c)(3) organization, which Signal is. There are no time limits. The good part, though, is you can probably have your DAF give the money anonymously, so the charity can't bug you every time they're having a fund drive.

ndesaulniers 5y ago
Another benefit, it sounds like, is that you don't have to pay capital gains on selling those shares. Like, let's say your intent is to donate $10k to some charity, out of the goodness of your heart and/or as a tax write off. You don't have that in cash, but do in stock. You could liquidate $10k of stock, pay capital gains on it (if it appreciated since acquisition), then donate it. So you're out the capital gains tax. The method you describe seems more efficient, since you don't need to sell; you simply transfer ownership of the asset. Or is there still capital gains to be paid? I wonder if billionaires are setting up charities as trusts for their kids, then "donating their shares to charity?"
- palmtree3000 5y ago
  You indeed don't have to pay long term capital gains tax, although you do have to pay short term capital gains tax.
  - loeg 5y ago
    No? Donations of stock to DAFs are not taxed and the full amount is deducted.
- AlbertCory 5y ago
  You're exactly right, you don't pay capital gains tax, and DAFs really are the poor man's "tax-exempt foundation." Billionaires have access to much fancier schemes than this, and I won't even attempt to describe all those. But yeah, I imagine "donating their shares without capital gains taxes" figures into them. I just noticed you said "trusts for their kids" -- that's something different. If the children can access it, it's not a DAF. But trusts are much more complicated, and someone who understands them (which I don't) can hold forth here.
  - jonas21 5y ago
    Yeah, I didn't realize what an enormous difference this made until I ran the numbers. In your example above, let's say the person purchased those 10 Meta shares for $38 each at the IPO and they're worth $322 each now. That's $3220 in proceeds and a $2840 capital gain. The taxes on this depend on income level and state of residence, but let's say they're in CA making $300K/year. They'll pay 20% federal capital gains tax + 3.8% net investment tax + 10.3% CA income tax, or $968 in taxes, and they're left with $2252. On the other hand if they donate the shares to a charity (or DAF), they get a tax deduction for the appreciated amount ($3220), which can be taken against 35% federal income tax + 10.3% CA income tax = $1459. So in the scenario where they just sell the shares, the proceeds after taking taxes into account are: Donor $2252 Charity $0 And in the scenario where they donate the shares, they are: Donor $1459 Charity $3220 In other words, for an effective cost to the donor of $793, the charity gets $3220.
deleted 5y ago
[deleted]
loeg 5y ago
Yeah, with a DAF you have the administrator cut a check to the qualified beneficiary. Also, the annual stock deduction limit is capped at 30% or so of income.
AlbertCory 5y ago
While we're on the topic: you can also leave your estate to a DAF. (If you're married or have kids, probably you should ignore this.) So that money goes to charity, but what charities? You won't be here, obviously. When you're looking into this, see if your DAF administrator allows a "successor trustee." If not, that institution itself (Schwab, Vanguard, whatever) will disburse it. If they do, you can pick someone whose values you trust to be the successor & disburse the money. (Probably someone younger than you!) You should ask them, or else they'll get a real surprising phone call right after you die.
mmoskal 5y ago
You can also do it with major crypto tokens. At least with Fidelity Charitable. You get to deduct the market value and don’t pay capital gains.