Four pro tips to increase your giving and reduce your taxes
While cash gifts pack a punch for charitable organizations like Lollypop Farm and can create a meaningful tax write-off, giving other, less obvious assets can be equally beneficial and save you big during tax season. Here are four tax-wise vehicles to help you give more and pay less!
Gifts of Appreciated Securities
Gifting long-term capital assets, such as appreciated stock, not only has the potential to decrease your capital gains exposure, but you’ll also receive a tax deduction equal to the security’s fair market value. And the charitable upside? Rather than selling your assets and making a cash donation, by gifting stock directly, you are able to give, on average, 20% more, making your impact even greater.
- Think outside the box: gifts of unique appreciated assets such as real estate, farmland, bonds, mutual funds, and even artwork can help you avoid capital gains tax.
Qualified Charitable Distributions (QCD)
QCDs are a great option for making tax-free gifts to charity from your IRA retirement fund; upon reaching 70 ½ years, you are eligible to make a QCD. And at 72, when you must take a required minimum distribution (RMD) from your IRA, you can gift all or a portion of your RMD to your chosen qualified charitable organization(s). This allows you to give more and avoid additional income tax.
Donor Advised Fund
A donor-advised fund (DAF) is a third-party-held account where you can deposit assets to be dispersed to charity over time. You can claim the tax deduction in the year you contribute a donation to your DAF. While in the DAF, this donation can grow tax-free, increasing your charitable impact over the life of the gift through your Donor Advised Fund.
You will need to work with a donor-advised fund-sponsoring organization to make this type of gift.
Charitable Gift Annuities
Charitable Gift Annuities (CGA) offer a secure charitable investment yielding fixed, steady income for life. When you pass, the remainder of the annuity is transferred tax-free to your chosen charitable organization.
A portion of your CGA income will be tax-free, and in the year of your investment, you’ll receive a partial tax deduction on the total value of the annuity.