Year End Giving Strategies
by Robert Lindstrom, Acts4Youth Board Member and CERTIFIED FINANCIAL PLANNER (TM)
What a glorious time of year for everyone, but especially for Christians as they celebrate the birth of Jesus.
For many of us, it’s also a time when we give money to various organizations, including our churches and deserving charities. As you contemplate your donations, I wanted to offer the tips below to ensure you are giving in the most optimal way, regardless of where you give.
1. Be sure to follow the IRS guidelines if you plan to deduct your charitable contributions. These include:
- Receipts specify “no goods or services were received for this donation”
- If you donate more than $250, you must have a receipt at the time you file your tax return.
- If you donate more than $3,000, the charity must send you a letter on their letterhead acknowledging the donation.
2. Give appreciated stocks (or funds) that have gone up in non-retirement accounts. This can be a great win-win. Let’s say you have a stock or fund that has gone up in value, meaning you would owe tax on the increase in value if you sell it. You can gift that to a charity, getting a tax deduction for the full amount you gifted. The charity can then sell the stock and doesn’t pay any taxes on it! This allows you to give more than you otherwise would have and pay less taxes!!
3. Over age 70.5? Consider a Qualified Charitable Distribution (QCD). A QCD allows your annual Required Minimum Distribution, or more, to go straight from your IRA to a qualifying charity. This not only reduces your income tax, but also reduces your AGI (the bottom number on page 1 of your federal tax return). This can be important because your AGI determines other things that could cost you money, such as more Social Security taxes and increased Medicare premiums.
4. Consider a Donor Advised Fund (DAF). A DAF works like this: you donate a chunk of money to this fund, getting a charitable tax deduction in the year you make the contribution. The fund then makes distributions you suggest over time, allowing the chance for tax free growth on the assets you contribute. There can even be strategies on which assets to contribute to the DAF. This strategy becomes all the more appealing if you usually deduct charitable contributions and the proposed tax reform changes actually go through.
We are grateful for the support you have given us and hope you will keep us in mind as you determine what giving you will do this year. If you would like to utilize one of these strategies and need our help, please contact Kevin Good at firstname.lastname@example.org or 443-527-9982. We hope you will find these strategies valuable even if your heart is taking your funds in a different direction.
God Bless and Merry Christmas!