You can also realize the important benefits of helping the people, communities, and organizations that are near and dear to your heart! We have had two consecutive strong years in the equity markets, making now a great time to review your personal philanthropic goals.
While there are many simple and more complex gifting strategies, I think it’s beneficial to focus on three to four core strategies that many people may find useful and simple to implement. I have numerous family members that have served and currently serve in our US Armed Forces. I endeavor to support numerous U.S. Military organizations through a combination of strategies such as:
1. Donating appreciated shares of stock. In this scenario, you generally don’t pay any capital gains tax and you can take an income tax deduction for the fair-market value of the donated stock (up to 30% of your Adjusted Gross Income “AGI”).
2. Donating Cash. Typically, you can deduct up to 60% of AGI for cash donations to public charities. Other limits may apply depending on the type of organization and the nature of the donation. If you are employed, it’s also worthwhile to see if your company will match a portion of your gift to increase the overall impact you are making.
3. Establishing a Donor-advised Fund (DAF). You make a donation of cash or other assets and become eligible to take a tax deduction for your charitable gift. Once your DAF is established, you control the timing and number of charities you support.
4. For individuals that are currently subject to Required Minimum Distributions (RMDs) from IRAs/Retirement Plans – Qualified Charitable Distributions (QCDs) from IRAs directly to qualifying charities to satisfy RMDs without increasing your income/tax.
Families should consult their personal tax advisors to ensure they receive maximum benefit for their charitable contributions. To claim a deduction for charitable donations, you need to itemize your deductions on your tax return. It’s also important to discuss timing/strategy and potential for charitable contribution deductions to be carried forward for up to five years.
The above strategies can also help affluent families remove values from their estate before possible “sunset” of the current exemption on the federal (lifetime) gift tax and estate tax that is set to occur at the end of 2025. As part of the Tax Cuts and Jobs Act (TCJA), the estate and gift tax exemption was doubled for tax years 2018-2025. The current exemption is $13.61 million per individual in 2024.
With the recent storms and devastation in FL, NC, and other areas, now may be a great time to leverage the above strategies to help your family and the many families in need throughout the country!
Sources: https://www.irs.gov; https://tax.thomsonreuters.com/blog/charitable-contribution-deductions-what-u-s-accountants-should-know/; https://www.fidelitycharitable.org/guidance/charitable-tax-strategies/reduce-taxable-income.html; JANNEY “Gifting Strategies & Charitable Planning”
The concepts illustrated here have legal, accounting and tax implications. Neither Janney Montgomery Scott LLC nor its Financial Advisors give tax, legal, or accounting advice. Please consult with the appropriate professional for advice concerning your individual circumstances.
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