Perhaps the most impactful perk for employees of Microsoft is that the company will match charitable donations up to a pretty high annual limit ($15K/year), and will also match volunteering time with a donation at a solid hourly rate up to that same cap.
Years ago, I volunteered at a food bank in Seattle, but since having kids I haven’t had time for regular volunteer work (perhaps this will change in the future as they get bigger) so I’ve been focusing my philanthropic efforts on donations.
I donate to a few local charities, but most of my donations are to Doctors Without Borders, an organization that does important, amazing work with frugality and an aim toward maximizing impact.
When I returned to Microsoft, I learned about an interesting method to maximize the amount of money received by the charity without the hassle of trying to send them appreciated stock directly.
It’s simple and convenient, especially if you’re already using Fidelity for your stock portfolio.
- Open an account at Fidelity Charitable. It’s not free, but at $100 a year, it’s worth it.
- Fund that account by moving appreciated shares of stock from your portfolio into the Fidelity Charitable account.
- Select how the funds from those shares should be invested (you can pick a low-return bond account, or a higher-return, more volatile index fund)
- Whenever you want to donate money to a charitable organization, use a simple form to “recommend a grant” to that organization from your account.
- After your grant is sent, visit the Microsoft internal tool to get a match of the amount donated.
Now, if you’re like me, you might wonder why you should bother with this hassle– wouldn’t it be easier to just sell shares and donate the money? Yes, that’s easier, but there are important tax considerations.
First, if you sell appreciated stock, you’re responsible for paying taxes (hopefully at a long-term capital gains rate with the Medicare surtax, so ~18.6% for most of us) on that sale. Then you give all of the proceeds to the charity — you’ll be able to write off what the charity gets as a donation, but that doesn’t include what you’d already paid in taxes.
Second, with the Trump-era tax changes, the Standard Deduction for most of us is now quite high, and the Sales-and-Local-Tax-Deduction cap of $10K means that many of us will barely exceed the Standard Deduction if we donate the MS-Matching-Max of $15000/year. However, here’s where the cool trick comes into play:
- The IRS grants you the tax deduction of the full value of your appreciated stock when you move that stock to the charitable account.
- Microsoft matches the value of your donation when you direct a grant to a charity.
What this means is that you can be strategic in the timing of your actions. Move, say, $30000 of appreciated stock into your charitable account, avoiding taxes on your gains because you didn’t “sell” the stock. Write that full amount off on your taxes this year. Then, later in the year, direct $15000 worth of donations out of your charitable account, getting Microsoft to match your donations up to the limit. Wait until next year and grant the other $15000. (You’ll hopefully have some left over for year three due to gains on your charitable account’s investments).
In this way, you can maximize the size of your donations to charity while minimizing the overhead paid in taxes. [1]
-Eric
[1]: I am, generally, an advocate for higher taxes, and certainly for paying what you owe. However, I am fully willing to follow these steps to maximize the chances that my charitable money goes to paying to save lives in the world’s poorest countries and not to padding the pockets of yet another defense contractor.
Impatient optimist. Dad. Author/speaker. Created Fiddler & SlickRun. PM @ MSFT '01-'12, and '18-, working on Office, IE, Edge, and Web Protection. My words are my own, I do not speak for any other entity. View more posts