Giving At Year End
The end of the year is a good time to review important financial matters, including one’s charitable gift commitments. For many people this will be especially true in 2018. This past year has seen changes that can influence when and how we make our charitable gifts. Careful planning today can help you balance your personal and philanthropic goals for the remainder of the year and beyond.
ACT NOW FOR TAX SAVINGS – DONATE NOW
Now may be an opportune time to examine the amount and timing of your gifts in order to maximize your tax savings this year. Your charitable deductions are one of the few tax-saving opportunities that are totally within your control.
Recent tax law changes have reduced tax rates for most Americans. By carefully planning your charitable gifts and completing them by December 31, you may find you can even further reduce the amount of tax you owe next April.
What Can You Give?
- Cash: Charitable gifts are most often made in the form of cash and checks. If you itemize your tax deductions, gifts of cash can serve to eliminate tax on up to 50% of your adjusted gross income (AGI).
- Appreciated Property: Giving securities (individual stocks, bonds, and/or mutual funds) and certain types of property that have increased in value can bring extra tax savings. Such gifts provide multiple tax benefits. Not only are they generally deductible from income tax at full fair market value if owned for longer than one year, giving in this way also enables you to bypass capital gains tax that would otherwise be due if the donated assets were sold. Gifts of such assets are deductible in amounts of to 30% of AGI.
If you believe a security will continue to increase in value, you may wish to donate it and use the cash you might have used to make your gift in instead repurchase the same investment. In so doing, you continue to own the same security, but you enjoy a new, higher cost basis. As a result, you could have less gain to report on a future sale at a higher value. You may also benefit from deducting losses should the security decline in value in the future.
- Depreciated Property: If you own an investment that has decreased in value since you have owned it, consider selling it and making a charitable gift of all or a portion of the cash proceeds. In addition to an income tax deduction for the cash contribution, this creates a loss you may be able to deduct from other taxable income. The combined amount of the deductible loss and the charitable deduction could actually total more than the current value of the investment.
Whether you make your gift in the form of cash or other property, deductions may reduce your taxes in as many as six years. Your financial services provider can furnish you with additional information and the forms necessary to complete your gift in a timely and tax efficient manner.
Looking to the Future
As a result of changes in the tax law, most Americans find they can now leave more to loved ones free of federal estate and gift taxes. This may make it possible to give more for charitable purposes both now and as part of your long-range financial plans. As you review your plans in light of tax law changes, you might wish to consider the following alternatives:
- Gifts with retained income for you or others. A number of methods exist that allow you to make charitable gifts while providing increased income for you and/or others, along with current and future tax savings and other financial benefits.
- A gift through your will or living trust. After providing for loved ones, you can direct that a specific amount, a certain property, or all or a percentage of what remains be devoted to charitable purposes you choose. There is no limit to the amount of charitable gifts that are deductible for gifts and estate tax purposes.
- Gifts of retirement plan assets. Recent federal tax law changes and proposals are designed to make charitable gifts from retirement plans even more attractive and simple. Under the right circumstances, gifts of these assets can be made to charity on a tax-free basis during and/or following your lifetime.
- Gifts of life insurance. You may own life insurance policies that have built up cash value but are no longer needed for the purpose for which they were intended. Such policies can make excellent charitable gifts. In addition to providing income tax savings today, gifts of all or a portion of the value of life insurance can also result in significant estate tax savings.
There are many ways you can make meaningful charitable contributions to CCC by carefully planning the timing of your gifts and the property use to fund them. We will be pleased to provide more information to you and/or your advisors to assist you with your year-end plans.