Year-End Gift Strategies for Giving Back While Saving on Taxes
December 04, 2019

Did you know that Americans donated $292 billion to charity last year? This is the third-highest number on record. Their year-end gift strategies allowed them to give back while also saving on taxes. Are you interested in making a meaningful contribution to society while receiving a few benefits for yourself?

Here’s how you can do it:

1. Bundling Charitable Gifts

Rather than donate $4,000 a year for five years to a charity, it may be more effective to donate the $20,000 all at once. Why?

Remember that the standard deduction for a single taxpayer in 2019 is $12,200. Bundling the $4,000 alone will bump you past the standard deduction. It also allows you to combine this donation with other eligible itemized tax deductions in the same year. You can then claim the standard deduction in subsequent years.

2. Transferring Money to a Donor-Advised Fund

A donor-advised fund (DAF) is a giving vehicle established at a public charity. Most people enjoy using it as they receive a federal income tax deduction in the same year that they make a donation. This money goes into a donor-advised fund account where it grows tax-free. Donors can then recommend grants to various charities through the DAF. Appreciated assets can also be donated to a DAF thereby avoiding capital gain taxes.

3. Donating Money From an IRA

Taxpayers older than 70 years of age are eligible to transfer up to $100,000 from their IRA accounts to a charity. This transaction is sometimes referred to as a charitable rollover. Not only are they able to donate the money tax-free, but they can also count the transfer toward their minimum distribution requirement for the year.

It is important to note that, in order for the transfer to qualify as a charitable rollover, the IRA trustee must directly send the funds to the charity. Pulling the funds out and writing a personal check will disqualify it.

4. Donating Appreciated Assets

Appreciated assets can include everything from real estate to common stock. Users who donate these appreciated assets to a qualified charitable organization save up to 15% or 20% in capital gains taxes. That’s because, by donating the stock directly to a charity, they can avoid paying a capital gains tax on it. 

Some people contribute their appreciated assets to an irrevocable trust. By doing so, they receive a charitable deduction on their income taxes.

Having trouble deciding which gift strategy will allow you to reap the highest reward? Contravisory can help. Schedule an appointment with one of our team members today for guidance on best practices for saving money on taxes.

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