Charitable giving is a perfect way to save on your taxes. We’d like to make it even easier by sharing with you some of the best ways to save...and give.
The tax laws encourage charitable giving. By taking advantage of the income tax charitable deduction, individuals can significantly reduce their income taxes.
Giving is much more than charitable deductions and tax brackets. Philanthropy provides a difference in what we can do. It is about thought, deliberation, going beyond what is expected, and becoming involved in the worldwide community. Philanthropy is about your charitable gifts reflecting your hopes for a better world.
Gifts of Stock
Gifting appreciated stock is one of the MOST effective means of tax savings available.
The benefits of gifting appreciated stock are three-fold. First, you have the satisfaction of knowing your money is invested in a cause important to you. Second, you avoid paying any capital gains tax. In addition, you will be eligible to receive an income tax charitable deduction for the FULL fair-market-value of the stock at the time of the gift. Your gift of appreciated stock is fully deductible up to 30% of your adjusted gross income, with an additional five-year carry forward.
Gifts of Real Estate
Residential real estate that has been owned for many years, when given as a charitable gift can be especially tax-advantageous. The property may have appreciated in value so much that its sale would result in a sizeable capital gains tax. If gifted directly, you avoid the tax as well as receive a charitable deduction for the full fair market value of the real estate.
Also, charities don’t pay capital gains taxes, so the full value of your gift goes to causes you care about.
IRA Charitable Rollover
This provision allows those 70 ½ and older to donate as much as $100,000 of IRA account assets each year directly to one or more public charities. The gift will count as part of the IRA owner’s required minimum distribution (RMD) for the year, but it is not included in the adjusted gross income.
This can be a great way to avoid having to pay taxes on your RMD if you want to support a charity, and it gives you a tax break even if you don’t itemize your deductions.
To qualify, the donation of the IRA assets must be made directly to a charity, not a donor-advised fund or grant-making foundation. The assets must be transferred directly to the charity from the IRA custodian, such as a bank or mutual fund.
Gifts of Life Insurance
If you own a life insurance policy that is no longer needed, consider it as a year-end charitable gift. To receive a charitable deduction, name the charity as both the owner and beneficiary of the policy. If the policy has a cash value, you can take a charitable deduction approximately equal to the cash value.
In addition, if you are continuing to pay annual premiums, those premiums will become tax deductible each year.
You can also assign all annual dividends to charity. This eliminates out-of-pocket contributions, yet still creates a deduction as dividends are paid.
For Further Information
This is only a short introduction to some of the best gift opportunities. Be sure to check with your accountant or other tax advisor for additional information on how these general rules apply to your situation.
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