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The Most Wonderful Time of the Year

Published by: Nathan Smith Date: July 24, 2018

Despite what many may think, including me, ‘Christmas in July’ wasn’t created by shrewd marketing executives looking to juice their sales during the typically slow summer months. But according to Country Living magazine, Christmas in July started in 1933 at an all-girls summer camp in Brevard, North Carolina about 35 miles south of Asheville. Since its humble beginnings during the Great Depression, Christmas in July is now celebrated by cities across the country, and the Hallmark channel plays Christmas movie for an entire week in July. Due to the great weather this growing season, I gave Christmas in July gifts to my coworkers, which consisted of canned pickles and salsa from my garden.

While the Christmas season is still five months away, it is never too early in the year for you to start planning your giving strategy. While there are no wrong ways to give to charities, there are certainly those that will maximize both the proceeds to the charity and the tax deductions that they will receive. While all charities accept cash donations, many also accept shares of stock, bonds, mutual funds, real estate, or privately held business interests.

In the example below, Matt and Veronica were able to reduce their tax obligation by $13,209 and give an additional $35,700 to charity simply by donating appreciated securities rather than selling them, paying the long-term capital gains taxes, and sending the proceeds to the charity.

Source: FidelityCharitable.org

Due to changes in the tax rules for itemizing deductions, another strategy known as ‘bunching’ is another way to get the most out of your charitable giving. In the example below, the single taxpayer donates $10,000 per year to his favorite charities, but due to the changes in the standard deduction ($12,000 per single filer) he won’t be able to itemize his tax deductions each year, but instead bundles two years worth of gifts to be able to itemize his giving every other tax year.

Source: FidelityCharitable.org

Donating appreciated securities and bunching are a few of the ways to maximize every giving dollar available to individuals and families. At Rather & Kittrell, we offer a variety of solutions that help our clients’ give toward their favorite charities while maintaining their overall long-term focus on their financial goals.

So, as I watch A Christmas Story and Home Alone this month while enjoying some pickles dipped in salsa, remember that the real Christmas is right around the corner, and the time to develop your giving strategy is now.

Nathan Smith is Portfolio Manager at Rather & Kittrell, and can be reached at nsmith@rkcapital.com.