Fall 2019

Maximize Charitable Gifts While Minimizing Taxes

Michael McCool, CFP®, CIMA®

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Did you know that the holiday season is also the year-end charitable giving season?  That’s right.  Over 30% of all charitable donations are made in December alone.  So if you are giving to charities this year, why not do it in the most tax efficient manner possible.*  Here are three smart giving ideas.

Gifting Appreciated Securities
Instead of giving cash, give appreciated securities to your favorite charity.  It’s easy to do and you avoid paying capital gains taxes on the donated shares.  Charites realize the full value of your securities because they do not pay taxes plus you get to deduct the full value of your gift if you itemize deductions.  If for any reason you want to hold on to your shares and give cash instead, consider donating the shares anyway and using your cash to repurchase them and establish a higher cost basis.

Qualified Charitable Distribution
Are you at least 70-1/2 years old and subject to Required Minimum Distributions from your IRA?  Then a Qualified charitable Distribution (QCD) might be right for you.  A QCD is a direct transfer of funds from your IRA to a qualified charity and can be used to satisfy your Required Minimum Distribution.  The main benefit of a QCD is that it is not counted as taxable income.  With lower taxable income, not only do you pay less income taxes, you may have lower taxation of your Social Security benefits and lower Medicare premiums.  This multiplier effect makes the QCD a very powerful tax savings strategy.

Donor Advised Fund
Think of a Donor Advised Fund as your own private foundation only with less expenses and ongoing administrative work.  By funding a DAF, you can get an immediate tax deduction if you itemize and the potential to give money to your favorite charities over many years. This is possible because the DAF seeks to increase the value of our original gift through prudent investing.  Another benefit is that you can put your family name on your DAF and pass it down to future generations.

If you would like to learn more about any of the approaches listed above or other tax efficient gifting strategies, please reach out to a CPC Financial Advisor.

*While we are familiar with the tax provisions of the issues presented here, as Financial Advisors of RJFS, we are not qualified to render advice on tax matters. You should discuss tax matters with the appropriate professional.

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