Charitable Giving and Beyond: Tax-Savvy Strategies
In the financial domain, the Required Minimum Distribution (RMD) from retirement accounts remains a key consideration, making Qualified Charitable Distributions (QCDs) an appealing tax-saving strategy. As you steer through the changing landscape of charitable giving, it’s essential to incorporate tax planning into your philanthropic endeavors. Here, we take on critical tax considerations that come important when crafting your charitable giving strategy.
1. Cash Donations Aren’t Always King
Charitable giving should not be limited to cash donations alone. The approach you take can significantly impact your tax liabilities. Taxpayers who have held highly appreciated stocks for more than a year in non-retirement accounts can explore the option of donating these long-term appreciated securities to charitable organizations. This strategy offers a double tax benefit: itemizing taxpayers can claim a charitable deduction on Schedule A for the securities’ fair market value while also avoiding capital gains tax on the income.
When collaborating with your financial advisor on philanthropic planning, think beyond traditional cash gifts. Consider your entire portfolio of assets. Exploring alternative giving options may allow you to support causes close to your heart while simultaneously optimizing your tax situation.
2. A Donor-Advised Fund Can Be a Win-Win
Donor-advised funds (DAFs) stand out as one of the most effective ways to maximize the impact of your philanthropy while enjoying tax benefits. These funds empower charitably inclined individuals to make strategic donations by investing and growing assets that can later be directed to any IRS-qualified 501(c)(3) organization.
Contributors to DAFs can claim a charitable giving tax deduction at the time of their donation, whether they donate cash, securities, or other complex assets. Beyond the immediate tax benefits, DAFs offer flexibility and the potential for asset growth, allowing donors to support charities with assets that might otherwise be challenging for the organization to accept and liquidate.
The Tax Cuts and Jobs Act of 2017 (TCJA) brought significant changes to tax deductions and standard deductions for taxpayers. While these changes impacted many itemized deductions, they also elevated the value of Qualified Charitable Distributions (QCDs). QCDs offer several tax advantages, including the fact that they are not counted towards adjusted gross income (AGI).
In Summary
The journey of navigating the intricate intersection of taxes and philanthropy is deeply personal. However, at CaMu Living Trust, we are dedicated to providing you with valuable insights and pro guidance to help you with tough financial decisions.
In alliance with our team of experienced financial advisors, we offer the current Tax Strategy Guide, a comprehensive resource to assist you in navigating the complexities of tax planning and optimizing your philanthropic endeavors.
