From Texas to Florida, a large swath of the United States was recently slammed with back-to-back hurricanes, leaving flooded streets, damaged buildings and wreckage all around. Huge economic costs will be associated with these hurricanes.
AccuWeather President Joel Myers believes the combined costs of the two storms could collectively cost the United States as much as $290 billion. This figure considers a broad range of factors, including business disruptions, higher unemployment, infrastructure damage, crop losses and elevated gas prices. The economic impact will extend and eventually also impact consumer spending, higher prices on items shipped out of Florida and Gulf Coast ports, manufacturing and construction backlogs, as well as tourism revenues.
Some of these losses will be covered by insurance, but many will not. Regardless of insurance coverage, millions of people are already impacted economically and face financial burden. Some estimates put the impact from Irma alone as leaving approximately 6 million Floridians without power and more than 200,000 in protective shelters.
Coming to the Rescue
In response to the hurricanes, President Trump signed a $15 billion disaster relief bill. Congress is expected to provide additional funding over the coming weeks; however, many residents need help immediately. As a result, there is an all-out effort on many fronts to raise funds for those impacted by the hurricanes – and many people are still considering giving or giving again.
Minimizing Your Taxes
The majority of people simply donate in the form of cash or via credit card to a charity. This is easy and simple – and as long as your donation goes to a tax-deductible charity, you’ll get the opportunity to itemize it. If you are considering a large donation or are ready to minimize your tax burden, consider the two strategies below.
Appreciated Stock Gifts
One of the first places to look if you want to give to hurricane victims is donating appreciated securities. To better understand the advantages of this strategy, let’s look at a comparison.
Say you own stock in Sample Co., which you purchased for $6,000 and is now worth $10,000. If you sell the stock, you’ll owe taxes on the $4,000 gain (assume a 25 percent tax rate for simple math). So, in the end, you’ll have $9,000 after selling the security and paying taxes on the gain. Then donate this $9,000 and you’ll save 25 percent – or $2,250 in tax deductions.
Donating that same appreciated security gives you a tax deduction of $10,000. Assuming the same 25 percent tax rate, this means you’ll receive a $2,500 tax benefit. By donating an appreciated security, you’ve saved yourself $250, showing it can pay to be generous.
IRA Charitable Rollover
Taxpayers 70½ or older have to start taking required minimum distributions from their Individual Retirement Accounts, which are treated as taxable income. In lieu of taking distributions, you can specify money be sent directly to a public charity (up to $100,000 per year) by using an IRA charitable rollover. What’s great about this form of donating is that you reap the tax benefits even if you don’t itemize since the impact is a reduction in taxable income. Further, since your Adjusted Gross Income is reduced, this might even aid you in saving on Medicare B premiums.
As always, consult a tax professional who can help you make the most of your money when giving to a charity.