Believe it or not, this year is now officially halfway over! This means you don’t have a ton of time left to think about your planned charitable giving. To spur you along, here are some old giving methods along with a new one that just might fit the bill
Appreciated Securities: If you own a stock that has significantly appreciated in value, you might consider donating some shares directly to a qualified charity. With your donation, you will avoid ever having to pay the capital gains tax. Better yet, your chosen charity won’t get taxed, either. And, if you itemize your deductions on your taxes, you stand to receive a tax break. Of course, given that so many people now opt for the super-sized standard deduction, it’s important to consult your tax advisor to see if your donation will actually result in a tax break.
Donor-Advised Fund: To help you get a tax break, you might consider “bunching up” multiple years of your planned giving through a donor-advised fund. From your new donor-advised fund, you can then take all the time you need to donate the money. Think of this as setting up your very own foundation on the cheap and with very few administrative headaches. Most brokerage firms make donor-advised funds really easy to start.
IRA Donations: For those over the age of 70 ½, you are allowed to donate directly to charity right from your IRA. Normally, when you take money out of your IRA, it’s taxed as ordinary income. However, if you donate the money directly to a qualified charity, you get to exclude those distributions on your tax return. For those who face required minimum distributions each year, using your IRA as a charitable tool is an especially tax smart way to give.
Charitable Gift Annuity: While these have been around for some time, a new version of charitable gift annuities is worth highlighting. To begin, with a charitable gift annuity, your charity gets the money right away and they simultaneously agree to send you periodic payments in return. After some fancy figuring is done, you are entitled to a tax deduction for a portion of your donation. Starting in 2023 under a new tax law, people over age 70 ½ can also establish a charitable gift annuity using their IRA. Importantly, unlike a normal charitable gift annuity, 100% of your donation is deductible on your tax return and it also counts toward your annual required minimum distribution. For some people, this new IRA charitable gift annuity might open up some particularly interesting tax planning opportunities.