How to Give and Benefit
Below are some strategies that we at Vanderbilt CPAs would like to share with you to help maximize the benefit of charitable giving during this holiday season. Keep in mind that the below are brief summaries of strategies – as with most tax planning we recommend meeting with a trusted professional.
Gift of Stock or Appreciated Property
You make a gift of appreciated property (stock, real estate, etc.). The charity sells the property and uses the proceeds to support the organization. You avoid capital gains tax on the sale of the property while receiving an immediate income tax deduction for the fair market value of the property. This strategy works best with gifts of low-cost basis assets.
IRA Qualified Charitable Distribution
If you are of the age to receive your required minimum distribution, you can direct a distribution directly from your IRA to the charity. The charitable contribution amount reduces the taxable IRA distribution dollar for dollar. Limited to $100,000.00 per year.
Charitable Remainder Trust
You contribute money or property to a trust. You receive annual, quarterly, or monthly payments during your lifetime, a portion of which may be taxed at favorable rates. Upon your death, the remainder benefits the charitable organization. These are particularly suited for appreciated property because any capital gains tax will be deferred until the time that it is distributed out to the income beneficiary.
Donor Advised Funds (DAF)
A contribution to a DAF qualifies as a charitable contribution in the year the funds are contributed. The funds are then invested by the DAF and can be contributed to a charity of your choice at a date that you choose. This allows for a potentially large deduction in the current year while spreading the benefit of the gift a single or various charitable organizations over various years.
Charitable Bequest
You include a gift in your will or trust to be made to the charity. Your estate or trust may receive a deduction. Confirm your beneficiary list is current and reflects your wishes.
Charitable Lead Trust
You place cash or property into a trust that pays a fixed amount to the charity for the number of years you select. Once this period ends, the assets held by the trust are transferred to the beneficiaries you name. This can be used to reduce both gift and estate taxes while maintaining principal for your heirs.
