What's most important to you when it comes to choosing your financial advisor? Someone who's aligned with your biblical values. How about someone who will take the time to explain your options? Certified Kingdom Advisors are professionals who meet high standards in competence and integrity and have been trained to offer biblical financial advice.
To find a Certified Kingdom Advisor in your area, visit faithfi.com and click Find a CKA. Do not be anxious about anything, but in everything by prayer and supplication with thanksgiving, let your requests be made known to God. Philippians 4, 6.
Hi, I'm Rob West. The phrase in everything means you can pray about anything, and that includes money. At the same time, God is not an ATM machine, so how should we pray about financial things?
Well, that's first today, and then it's on to your calls at 800-525-7000. This is Faith and Finance, biblical wisdom for your financial decisions. Some folks question whether it's okay to ask God for financial help. So first off, let's dispel the notion that God doesn't care about your money, or that it's wrong to pray about your finances.
Nothing in the Bible says that. If it's important to you, it's important to God. He wants to be a part of your life, your whole life. And besides that, you might as well talk to him about your finances.
He already knows them down to the last penny. 1 John 5.14 says, This is the confidence we have in approaching God, that if we ask anything according to his will, he hears us. Now, there are two key points in that verse. First, you can ask God for anything. Second, he will hear your prayer, if it's according to his will.
That's where things get a bit trickier. How do we know what God's will is for us, so that we can ask for things within it? Well, it's critical to understand that throughout the Bible, God promises to meet your needs, not necessarily your wants and desires. If you feel a prayer has gone unanswered, you might be mistaking a need for a want.
So let's make sure we understand the difference. A home and roof over your head is a need. A want could be a four bedroom house with three and a half baths, a downstairs rec room, the three car garage, and a jacuzzi. Now, there's nothing intrinsically wrong with any of those things, if it's God's plan for you and your family. Every circumstance is different, and God's plan for every family is different. The key is to find his will for your life and to learn to be content with what he provides, even when you see others in the neighborhood with more. First Timothy 6 tells us, Now there is great gain in godliness with contentment, for we brought nothing into the world, and we cannot take anything out of the world. But if we have food and clothing, with these we will be content. Notice the apostle Paul isn't even asking for a house, just food and clothing so he can continue to bring the gospel to the Gentiles. I'm not saying you should take a vow of poverty and head into the mission fields.
I'm just trying to give you perspective. Contentment and gratitude are important because God owns everything and he is our ultimate provider. John 3 27 says, A person cannot receive even one thing unless it is given him from heaven. We are simply his stewards, and as such, we are expected to manage his resources according to his principles.
If you're not doing that, it's a good place to start improving your financial picture. Otherwise, how can you expect God to provide more? First Corinthians 4 2 reads, Moreover it is required of stewards that they be found trustworthy. Something else to keep in mind, God's plan for you may only be for a season. He may someday give you a big raise, or make you the head of the company you work for, or send you to the mission field.
You must practice patience and wait on the Lord. God is always faithful to meet our needs. He doesn't delight in your struggles. Paul says in Romans 8 32, He who did not spare his own son, but delivered him up for us all, how will he not also with him freely give us all things? Okay, now you know the importance of praying within God's will, is there anything else to consider?
Well, yes, there is. If you're really struggling to keep a roof over your head and food on the table, it could be that God plans to meet your needs through the abundance of a fellow Christian. He gives abundance to some so they can share with people in need, and by doing that, his love and glory are demonstrated to an unbelieving world. Paul writes about this in 2 Corinthians 8 14, At the present time your plenty will supply what they need, so that in turn their plenty will supply what you need. That means if you struggle with an unmet need, let your church family know about it. You'll have to set aside your pride, but God will be glorified as your needs are met through the church family. Present yourself and your need with humility to your church leaders, and be grateful for whatever course they decide. God has not abandoned you or overlooked your needs.
His plan is to provide for you in a way that meets your needs, all according to his will. All right, your calls are next, 800-525-7000, that's 800-525-7000. I'm Rob West, and this is Faith and Finance, biblical wisdom for your financial journey.
Stay tuned. As a faithful listener of this program, you know that there's life-changing financial wisdom in God's word, and FaithFi is here to help you and millions of others learn to be good and faithful stewards. As a non-profit organization, we rely on help from monthly FaithFi patrons, supporters of this mission, to help us continue and expand our outreach. Has God provided financial answers for you through this ministry? If so, consider becoming a monthly FaithFi patron.
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This is Faith and Finance. I'm Rob West. We're taking your calls today, 800-525-7000, that's 800-525-7000.
To Port Charlotte, hi George. Go ahead, sir. Okay. My question is, what are your thoughts on this digital income we're talking about, a digital?
It's a great reset. Yeah. Are you talking about a digital currency?
I guess that's what would be considered. My understanding is, we've seen some other programs, you have a digital card and the government kind of controls what you can use and what you can't use. I think you need to be careful there. There's a lot of conspiracy theories, a lot of fear kind of running rampant. There is some reason, I think, for us to be concerned about a central bank digital currency, but we just need to not take that too far, and here's what I mean by that. It's still a long way off. It's in a research phase.
Is it a good idea? No, I think the potential for government to know who has money, to impose rules, and even to limit transactions is a real cause for concern, but keep in mind, the Federal Reserve can't put this in power. The Fed Chairman Powell has said so much himself. It does require an act of Congress, which is responsible for coinage, and if we were to get this through Congress, which would be very difficult with divided government, we would have to see how they approach it with regard to privacy, and that's the real concern here, but it's a long way off.
China is still in a beta phase on theirs, and they started back in 2016, and we're just now finishing the beginning phase of the research on this. So I think the bottom line is, yes, we should stay mindful of what's going on, continue to watch and listen. We need to show up and vote for folks that respect the privacy and aren't in favor of government overreach into our private lives, including with regard to financial transactions, which with a central bank digital currency, all of those transactions, 100% of them, would be at the very least known to the government, and the idea that they could limit transactions based on social criteria is a real possibility. But it's a long way off, and it would require Congress and the president to be on board, which I just have a difficult time believing we will get there. And you've even had some states, like the state of Florida was right out in front saying that a central bank digital currency does not comply with the Florida Uniform Commercial Code, the UCC.
And so they basically already gone out in front and saying, this is not going to work in the state of Florida, and you're seeing other treasurers and states across the country follow suit. So it's something to keep an eye on. It's not something that's imminent. And I think we need to be careful about getting kind of swept up in some of the fear mongering that's going on. But it's a great question, George, and we'll continue to keep you updated as things progress. And we appreciate you checking in with us. Let's head to Florida. Cindy has been waiting patiently, and I understand you have a question about your mortgage.
Go ahead. Yes, my mortgage is like $16,000 left to pay off. And I'm about a year or two from retirement. And I wondered if I should take it out of my savings and just pay it off or just... Yeah. How much do you have in savings, Wanda, or excuse me, Cindy?
Probably around $50,000 just on my own. But I have an investment with like 300 and some thousand. Okay.
Very good. Yeah. I like the idea of you not pulling that out of investments at this point.
I think given the fact that you have 50,000, once this is paid off, obviously you could take that monthly mortgage payment and then just put it right back into savings every month. Would that be your plan? Right.
Yeah. So that makes a lot of sense to me, whether you do that all at one time or you do that, let's say, over the next 18 months where maybe you take $1,000 a month and do that so that as you're entering retirement, which you said is a year and a half away, the key would be that you have it paid off by at least that point. And that would allow you to do it not all at once so that if you needed that 50,000, you'd still have access to it. If you really were convicted to be out of debt immediately, you could do it all right away. But I think spreading that out over 18 months makes a lot of sense to me. And that way, as you retire, you've eliminated that expense and it's going to make it all that much easier to balance your budget.
And so do that at $1,000 a month. And I think once you do it, you'll be thrilled that you did, Cindy. Thanks for your call today. To Tampa Bay, Florida. Hi, Bill.
Go ahead, sir. Hello, my question is, I have rental properties and I have one rental that's always a problem. And the rental is moving out of the property and thinking of selling it. And I just don't know how the capital gains work. Because I bought it for $100,000 before, like five years, six years ago, and now it's worth $300,000. So the calculation of the capital, I have a mortgage for $100,000. But I repinanced it like three years ago and for $175,000, so I took $75,000 to buy another property, basically. Yeah, the mortgage doesn't affect the capital gains calculation.
It really all has to do with the profit, Bill. So what do you think the property is worth, roughly, today? It's $300,000. Okay, that's what you would sell it for?
Yes. Okay, and what did you buy it for? I owe $172,000.
Yeah, but it's not, the mortgage really doesn't affect this. It's your original purchase price. What did you pay for it?
Original purchase price is $100,000. Okay, so you've got about $200,000 in profit, is that right? Yes. Yes. Did you put some money into the property? Do you have improvements that you put into it? Yes. Yes, I did some plumbing, water, and sewer plumbing on the property.
Okay. Yeah, so you're going to want to check with your tax preparer on that to determine what of those improvements can be used against your capital gains. But essentially, what you would do is you'd take your selling price, let's say you get $300,000, and you'd subtract $100,000, your original purchase price, and then you'd subtract any improvements that you're able to count towards your cost basis. Let's say you put $50,000 in it, and you'd be left with $150,000 in profit, in my example, $300,000 minus $100,000 minus the $50,000 in improvements. And then you'd pay capital, long-term capital gains rates on that $150,000 in profit.
The way the capital gains tax works is it's not added to your taxable income, it's a separate capital gains rate, and as long as you held the property for more than a year, you would likely pay 15% as a capital gains rate on that gain of, in my example, $150,000. But let's confirm that. Are you married? Yes, I'm married. Okay. And if you're married filing jointly, do you make more than $89,000 per year? Yeah, yes, more than, yeah. Okay. So if you fall between $89,000, and this is income, we're not talking about the gain now, if your taxable income, adjusted gross income is between $89,000 and $550,000, then your capital gain rate on any capital gains that are long-term is 15%.
So you would pay 15% on that total capital gain. Does that make sense? Yes. Can I have the last question? Real quick.
I just got a few seconds. Instead of going to all IRS, how much can I give to church? You know? So instead of, I don't want to give like $30,000 or $40,000 to IRS, how much can I give towards the sale of the property? Yeah.
Do you mean out of the sale of the property? All right, let's do this. I've got to take a quick break.
That's a great question. If you stay right there, we'll tackle it just after this break. We'll be right back.
Stay with us. We are grateful for support from Soundmind Investing and the Faith and Finance Program. For more than 30 years, they've been helping Christians reach their financial goals with step-by-step guidance for investors at every stage, from those just getting started to those getting ready for retirement. Through scriptural principles and practical suggestions, SMI offers financial wisdom for living well. More information, including the short video webinar on profit and peace of mind, no matter what's happening in the market, is available at soundmindinvesting.org. Hey Greg, I need some advice.
Oh, what's up? I'm really struggling with finding ways to cut back. With costs going up, especially in healthcare, what do you guys do? Oh, we use CHM, Christian Healthcare Ministries. It's a health cost sharing ministry that's been sharing members' eligible medical bills for over 40 years.
Sure helped us stick to our budget. Here's the website. CHMinistries.org.
CHMinistries.org. It's great to have you with us today on Faith and Finance. I'm Rob West. All right, we're heading back to the phones for your calls and questions, 800-525-7000. Just before the break, we were talking to our friend Bill in Tampa Bay. Bill has several rental properties, one of which that hasn't been performing as of late. He's looking at selling it and just wanting to understand the tax implications. We were talking about the capital gains tax that he would owe on the property.
But Bill, as a follow up to that, you were curious about how you might be able to do some charitable giving and reduce that tax liability. Essentially, you're going to owe the capital gains if you sell the property. The way to avoid a portion of that or all of it, depending on what you'd like to do, is to give the property away prior to the sale. Now, you don't have to give 100% of the property.
You could give whatever portion you want. The best and most effective tool to do this is called a donor advised fund. Essentially, let's say just for nice round numbers, you gave 25% of the property to your donor advised fund. Well, if you had $100,000 capital gain, when you sold the property, you would actually only have $75,000 that would be subject to capital gains because 25% of the property or $25,000 would be in your donor advised fund. So the donor advised fund doesn't pay any capital gains because you've given it away. So that would be a way that you could actually fund a vehicle for generosity, your donor advised fund, and reduce your overall capital gains tax. Does that make sense?
Yeah, that makes sense. So that would be the way to go about that. The other way you could do it is you sell the whole thing. You go ahead and pay the capital gains. So it's 15% on, let's say you had $100,000 in gains. You'd have $15,000 that you owe in taxes. You could then turn around and take a portion of that money, give it away, and as long as you itemize on your taxes, you could take that gift as a deduction. But it wouldn't go against your capital gains.
You would have that no matter what. It would go against your taxable income that you would get the tax benefit for the deduction. The only way to actually either eliminate or minimize the capital gain itself is to give all or a portion of the property away, in my case to a donor advised fund, prior to the sale. Okay, okay. But it will not affect the sale of the property if some portion of it is donated to?
It doesn't. No, it's really just where the proceeds are paid from the sale. So when you give a portion of that property away, then you show up at the closing table, the closing agent would just cut, in my example, if you gave 25% of the property to your donor advised fund, they would take 75% of the proceeds and write a check to you, and they take 25% and write a check to your donor advised fund so you never receive it.
It goes into your fund and then you can recommend grants to charitable causes or nonprofit organizations out of that fund. So if you want to learn more about that, the place to go is National Christian Foundation. You can learn more at ncfgiving.com. Ask them about opening a giving fund, which is their name for a donor advised fund, and tell them that you're interested in gifting a portion of a piece of real estate to your donor advised fund.
They can tell you exactly how it works. Again that's ncfgiving.com. And by the way, National Christian Foundation was founded by Ron Blue, Larry Burkett, and an attorney named Terry Parker, and so you can feel really good about working with those folks. Thanks for your call, Bill. To Illinois.
Hi, Wanda. Go right ahead. Yeah, I have a piece of property that was in a trust, and it was to be given to me and my brothers, and the last survivor gets the property. So I was a beneficiary, and since I've outlived my brothers, do I sell that as a beneficiary or as an owner? Yeah, so this trust was established by your parents, is that right? Yes, yes.
Okay. And so at their passing, this property was to be placed in the name of you and your siblings, is that right? Or was it to be sold? What were the- Yeah, the trust is- The trust, it was put in a trust for me and my brothers to live there, and whoever outlived us, then the property goes to the last survivor. I was in charge of the trust, though. My brothers have passed, so now I didn't know how to go about selling it as an owner, or do I sell it as a beneficiary for the capital gains? Yes. Yeah, that's great.
Well, when you take possession of the property, you get the stepped up basis on the property, which would be that fair market value. Now, I would contact, do you have an estate planning attorney that you've worked with, perhaps the person that set up the trust? The gentleman, yeah, the lawyer that set up the trust, he's still around.
Okay. I would contact him, Wanda. I wouldn't want to say necessarily what your next steps would be without seeing the trust documents. Because he's the one that set it up, he would be able to tell you exactly how you would go proceed from here as to liquidating the property. What I would suspect would happen is that because you've fulfilled the trust obligations, that it's to be passed to that final person of the beneficiaries, is that you would transfer that out of the trust into your own name, and then you would sell it at that point using that stepped up basis that would come with that.
You would have any capital gains for proceeds beyond that cost basis. But as to the order of that and exactly how you'd go about that in terms of distributing the process to you and then turning around and selling it, you'd want to have that attorney give you some counsel on exactly how to go about that. So I would place that call to him, Wanda, and have that attorney walk you through the process from here. And given that he created the trust, it'll be very easy for him to pull that up and then give you instructions on the next steps. I just didn't know if being a beneficiary, as a beneficiary, if you have to pay capital gains also.
That's something that you get. Yeah, you would, certainly, if the selling price is beyond the stepped up basis for the property that you're inheriting through the trust. And so that's part of what will need to be determined. He can help you determine the date for the market value based on the date of death, and then you'll put that against the ultimate selling price to determine whether you have capital gains. So you will certainly get a stepped up basis as a part of this. The question is just whether there's any capital gains beyond that upon the sale. And he should be able to help you handle that, and then you'll want to talk to your CPA about reporting that appropriately in the year of the sale. So hopefully that helps you, Wanda. All the best to you as you go through this.
I know there's a lot of work that you've already put into this, and it sounds like you have a bit more before this is eventually sold. But once it is, then you will have sufficiently exhausted all of your responsibilities as that trustee. Thanks for your call today.
Well, that does it for us today. I'm Rob West. Thanks to our amazing production team and to you for listening. I hope you'll join us again next time right here on Faith and Finance. Faith and Finance is provided by Faith Buy and listeners like you.
