Three Charitable Strategies in the Face of the New Tax Law

Three factors are combining to give importance to having a strategy in place for your charitable giving: the window for 2017 closes in ten days, new tax provisions impact the deductibility of charitable giving in 2018, and a favorable stock market has left many investors with unrealized capital gains.

The standard deduction virtually doubles under the new tax plan while state and local tax deductions will be capped at $10,000. For some, this means charitable deductions that would have lowered taxes in 2017 will have no such impact in 2018. STRATEGY: Combine your 2017 & 2018 planned contributions in 2017. You'll pay the same amount, but have a lower hurdle to clear to itemize those deductions.

Are you looking at capital gains after a good year in the market? Are you wondering where the funds would come from to double your contributions in the strategy above? STRATEGY: Contribute appreciated stocks in-kind (i.e., give the stocks themselves, don't sell them and give the cash) from one of your TAXABLE accounts (no IRAs) to a charity that is equipped to take them. This usually means they have to have a brokerage account set up beforehand. You avoid paying tax on the capital gains and get to deduct the market value of the stocks.

Finally, if you are over 70 1/2, you can get the full deduction of your contribution regardless if you itemize or not, avoid the 50% of income limit (soon to be 60%), and satisfy your minimum required distribution (RMD) requirements. STRATEGY: Make a Qualified Charitable Distribution from your IRA for up to $100,000. By using this strategy, the distribution from your IRA is never counted as income, isn't treated as an itemized deduction and therefore not limited as a percent of income, and counts towards your RMD. Again, sorry kids, you have to be 70 1/2 or older the year you make this move.

With change, comes new strategies. Talk with your financial planner about how the new tax code impacts yours.

Compton Advisors, LLC is a Registered Investment Adviser (RIA) firm regulated by the Securities Division of the Missouri Secretary of State office. Compton Advisors, LLC does not render personalized financial, investment, legal, or tax advice through this blog. This information is for informational purposes only and does not constitute financial, investment, legal, or tax advice. This information has not been approved or verified by any governmental authority.

Completed Trades

John Dutemple made the following trades, for a family trust account, Monday, December 18 with limit orders:

Bought Ennis, Inc. (EBF)

Bought Nike, Inc. (NKE)

John Dutemple made the following trades, for a family trust account, Tuesday, December 18 with limit orders except as noted:

Bought Ennis, Inc. (EBF)

Bought Harmony Gold Mining Company ADR (HMY) *

Sold Harmony Gold Mining Company ADR (HMY) (Market order) *

Sold short Harmony Gold Mining Company ADR (HMY)

Sold short Cemex SAB de CV ADR (CX)

Sold short JA Solar Holdings ADR (JASO)

* Mr. Dutemple incorrectly entered a BUY order instead of a SELL SHORT order and corrected his error on discovery after it was executed. These trades violated two provisions in the firm's Code of Conduct:

1) Two transactions (the initial purchase and the subsequent sale to reverse the error) were made without posting the trades 24 hours in advance.

2) A BUY and a SELL order on the same security were entered within a 60 day period.

Though the Code was violated, the rationale behind the two provisions were not. In the first case (posting transactions ahead of trades), the provision is in place to prevent front-running, i.e. making trades ahead of clients. The violations in this case were not intended to hide Mr. Dutemple's intent, but rather were an error and its immediate correction followed by the transaction that was posted prior.

The second provision is in place to discourage short-term trading on price data and encourage analysis of the firm on a fundamental basis. Again, the short holding period was due to the correction of an error, not an attempt at short-term profit.