Looking at charitable giving from a tax perspective, there are a number of ways to maximize your donations this season. keep in mind that tax savings will only be applicable to individuals who make sure to itemize their income tax deductions. also be cognizant of the fact that only donations made to qualified charitable organizations are indeed deductible for tax purposes. so lets look at some simple straight forward strategies
***All of the following are strictly suggestioons. As with all securites and tax related decisions you should always seek the advice of a professional tax advisor or attorney or thoer professional that specializes in these following matters.
Donating appreciated securities for tax purposes
Yes, cash contributions are by far the most common means of charitable giving. but you may want to consider another way to receive a greater tax benefit. Im talking about contributing appreciated stocks or other securities rather than jsut your typical cash donations.
According to accountants and tax experts, if you decide to donate a publicly traded stock to a public charity- in this case you dont want to first sell the stock- you as the donor are allowed to claim the fair market value of the stock (rather than the cost basis) and up to 30% of your adjusted gross income. when donating the securities, the donor does not realize capital gains no matter the extent of the apprciated value of the stock/ security. its sort of a double win because the tax savings can now include both the charitable deductions as well as shifting of the potential capital gains tax liability.
You may consider a donor-advised fund
A donor-advised fund is an option many times offered by community foundations and other similar organizations which allows donors like yourself to make contributions to a respective fund, immediately take a tax deduction, and then later make recommendations regarding the actual distribution of the gift to public charities. This is good information to have.
In the meantime and until your selected donation is fully distributed it can be invested to allow for growth that maximizes the impact of the gift. In fact, it’s possible at many institutions to create an endowed fund which contributes income earned from the original contribution to charity in perpetuity. This can be a particularly useful strategy if you find yourself faced with a particularly successful year that encourages you to make a large charitable gift without the time to properly conduct due diligence on the ultimate recipient of the gift.
Consider donating closely-held business interests or other complex assets
Often, small business owners find themselves owning assets with very low or no cost basis. Situations like this present many opportunities for charitable planning. Planning to donate closely-held business interests, real estate, personal property or other types of assets requires careful planning. The potential tax savings with these types of assets can be enormous, though. When considering making gifts of these types of assets it is crucial to consult tax, legal and charitable professionals to ensure that the plan is properly designed and executed.
Maximizing year-end giving requires one to realize more than simply the potential tax benefits. With that in mind, when considering giving this holiday season, consider doing three things:
- First, focus your efforts on the causes most closely aligned with your passions. Focusing the majority of your giving on a small number of causes will have a larger impact than spreading the giving very thinly across a wide number of causes.
- Second, get involved with a charity you care about. There are countless volunteer opportunities and if you are unsure of your true passion there is no better way to learn about the charitable community. Always keep in mind that one of the most valuable things that can be given this time of year is your own time and self.
- Third, extend your giving beyond the holiday season. While tax-driven gifts often come at year-end, this isn’t the only time that charities are in need. A recent study by Network for Good found that twenty-two percent (22%) of online gifts are made on either December 30 or 31. While it’s great that these gifts are made, it’s also important to make sure our giving continues throughout the year.