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Wall Street Steward Blog

The Sophisticated Tither

Being born and raised in the south, I quickly realized the true meaning of the “Bible Belt.”  For all of the outsiders that might be reading this, the southeast region was dubbed the “Bible Belt” due to its socially conservative political leanings and an extremely high Christian Church concentration.  This area is home to me, and it has had quite an impact when it comes to how I view finance and how I disperse advice.

That being said, no matter what part of the country you are from, it is quite likely that you do not ENJOY paying taxes.  Even the most patriotic people I know will scoff at an unnecessary tax bill.  Most agree that paying less in tax frees up more discretionary income, which could be used to help support a family, help the underprivileged, or start a new business venture.

“What does paying less tax have to do with the Bible Belt?”  If you are not asking this question, either you are not paying attention or you are very patient.

There is a simple strategy that I have used with clients for years that helps reduce their personal tax liability and simultaneously bless the local church or charity of their choice.  Instead of writing that weekly tithe check, why not gift an investment that has appreciated? 

If you own an investment (in a taxable account) that has appreciated in value and you gift that investment directly to a church/charity, you accomplish three things:  (1) you avoid the potential capital gains tax that would result from an outright sale, (2) you have gifted an amount of money that is more than what you invested and (3) you avoid having to write periodic checks to the organization.

EXAMPLE
XYZ Stock purchased 1/15/2008 for $1,000
XYZ Stock valued at $2,000 currently

If the stock is gifted to your organization directly, you have effectively given $2,000 that really only “cost” you $1,000.  The receiving church does not pay tax, so when THEY sell the stock in their account, there is no capital gains tax due.  Instead of giving the stock, if the owner chooses to sell the stock themselves, they would be subject to a capital gains tax.

WHY IT MAKES SENSE
Capital gains tax avoided?  Check.
Gift more money then it “Cost” you?  Check.
Any need to write checks for the next year?  Nope.

Creative Commons License photo credit: Valerie