Charitable Giving Made Easy
How can Charitable Giving be Structured?
Outright Gifts: The easiest way to benefit the charity immediately and exclusively is by writing a check. Providing that you qualify, you receive an income tax deduction in the year that the gift is made. Assuming that you are in the 25% Federal income tax bracket and you are able to itemize deductions, a $10,000 gift may reduce your taxable income by $10,000 resulting in a tax savings of $2,500.
Required Minimum Distributions from an IRA account: If you are over 70 ½ and are receiving mandatory distributions from your IRA, consider gifting a portion to your favorite charities each year to possibly offset taxable income. Qualified Charitable Distributions (QDC) made directly from your IRA custodian to your charity, count toward your Required IRA distribution but are not included in your taxable income. This is especially valuable for those who normally do not have enough itemized deductions to be able to claim the gift on their income taxes. In addition, since the withdrawal is not listed as taxable income, it is excluded from the calculation in determining the extent of taxation on Social Security benefits. Simply call the financial institution that holds your IRA and tell them the amount that you want to give and provide them with the name and address of the charity.
Gifts of Appreciated Property: Shares of appreciated stock can be an excellent way to make a gift to charity. Since you gave the stock away, you don’t pay tax on the appreciation. You receive a tax deduction for the full value of the stock on the day of the gift. Since the charity doesn’t pay tax it sells them tax free. Assume that you paid $1,000 for a stock years ago and it is now worth $10,000. If you give it to the Club, you may be able to deduct the full $10,000 from your taxable income. You do not have to claim the $9,000 of capital gains.
Matured Savings Bonds: Do you have US Savings Bonds that were purchased many years ago? After thirty years US Savings Bonds no longer earn interest. When redeemed, the deferred interest on the bond is taxed at the federal level but not the state. If you give the redeemed proceeds of the bonds to a charity and you itemize deductions, you will offset the deferred interest on your tax return. To get more information on your savings bonds including a great calculator to help you figure what those old bonds are worth visit www.treasurydirect.govhttp://www.treasurydirect.gov/bv/sbcprice
Donor-Advised Fund (DAF): Get a tax deduction today, give to a charity tomorrow! A Donor-Advised Fund allows you to make contributions for tax deductions in the current year even though the funds are dispersed in later years and also provides the opportunity to benefit multiple charities or causes that are important to you. The minimum investment in a DAF is $5,000 – $10,000 depending on the institution. A contribution to a DAF can be helpful in offsetting income resulting from a significant taxable windfall, like the sale of a property or securities. You will receive a current tax deduction this year even though you make the actual dispersion to your favorite charities, including the Club, in subsequent years. Donations can be made on line with a click of a mouse. The following are websites for several popular DAF’s. www.fidelitycharitable.org, www.nptrust.org, www.vanguardcharitable.org, www.aefonline.org
Charitable Giving at Death
Naturally, you can name a charity such as the Club in your will and revocable trust. Here are a few other ideas that may be simpler and more tax efficient.
Beneficiary of Life Insurance: You can name the Boys & Girls Club as one of the beneficiaries on your life insurance policy. All you need is a change of beneficiary form from your life insurance company.
Beneficiary of IRA or Qualified Retirement Plan: Like life insurance, you can add the Club as a beneficiary on your IRA or qualified retirement plan. Since the charity is a tax exempt organization, it will not pay income taxes on the distribution received and your estate will not pay estate taxes on the amount given. If you currently have a charity named in your will or living trust, you may want to consider naming it as a beneficiary of your IRA instead. This way your family members can receive more money that is free of income tax though your will and less tax-encumbered money through your IRA.
Beneficiary of an annuity: If you have a non-qualified annuity with sizeable tax-deferred growth, consider including a charity as one of the beneficiaries. The Charity’s share of the deferred growth upon your death is not taxable to them.