Whether you’re looking to defray a mounting tax bill, leverage assets to help others, or both, the Oregon Individual Development Account (IDA) Initiative may be for you.
A unique way to “pay” 90% of your Oregon state taxes using appreciated stock, the initiative is a smart way to get the most from your assets—and make a difference in the lives of fellow Oregonians.
If you’ve never heard of the initiative, you’re not alone. Like Forrest Gump, the program is a bit of a sleeper—an unassuming gem that packs a punch when you see it through.
What is the Initiative?
Created in 1999, the Oregon IDA Initiative is a matched savings incentive program that helps lower-income Oregonians save toward a defined goal, such as purchasing a home or starting a business.
Managed by Neighborhood Partnerships, a 501(c)(3) nonprofit, the program vets applicants and allocates funds based on need.
Contributors to the Oregon IDA get the biggest tax benefit out there. A full 90% of your donation is returned to you in the form of an Oregon state tax credit—a direct subtraction from your state tax liability—while the remaining 10% can be written off as a charitable contribution on your federal tax return.
Unused tax credits can be carried forward for three years.
The Ideal Fit—at the Right Time
So, who should consider purchasing Oregon IDA tax credits?
First, you need to have an Oregon tax liability to pay. Then, individuals with appreciated stock who wish to pare back a concentrated stock position are good candidates. Charitably-minded individuals with appreciated stock are ideal candidates.
Under the initiative, only a limited number of tax credits are made available each year. This year, it’s $7.5 million, and once those credits are gone, they’re gone.
Last year, credits ran out around mid-December. In prior years, they have run out sooner, so it’s best to be proactive.
A Powerful Financial Tool
To understand the power of donating to the Oregon IDA, an example may help. Consider John and Jill, who gifted shares of appreciated stock valued at $60,000 to the program.
For their donation, John and Jill received a 90% state tax credit of $54,000 to reduce their Oregon tax liability, and a $6,000 federal tax deduction (“worth” about $1,200 in tax savings in their tax bracket).
While they gave away $60,000, they received a tax “value” of $55,200, and owed no additional tax on the embedded gain in the stock.
In other words, John and Jill were able to reduce a concentrated or highly appreciated stock position and receive 92% of the value of that stock in return as a tax asset. Had they chosen to sell their position instead, they would have received only 76% of the value after paying a 15% capital gains tax and a 9% Oregon tax.
Like Peas and Carrots…
Donating appreciated stock was clearly a savvy way for John and Jill to pay their tax liability.
Additionally, as charitably inclined Oregonians with a passion for increasing affordable housing opportunities, John and Jill’s values aligned well with the Oregon IDA Initiative’s mission.
So while they could not direct exactly how their donation was allocated (Neighborhood Partnerships manages this), their move was a win-win—just like peas and carrots.
…Not Like a Box of Chocolates
Gifting stock to the Oregon IDA Initiative may be better than a box of chocolates because you actually know what you’re going to get—powerful tax savings and the reward of helping others.
To evaluate whether this program might be a good fit for you, reach out to your Vista team. We’ll help you decide if this is a good year to donate appreciated stocks to save on your next tax bill.
