Although there’s much debate about whether or not the recession is waning, some companies are realizing gains again and that can translate into bonuses, appreciated stock, and other tax implications. Charitable giving can be a powerful way to offset some of that burden while doing good.
And creating donor advised fund can help you make a good thing even better -- since it allows you to make a single gift for a tax deduction this year and then take your time choosing the charities you want to support with grants from your fund.
Amid all the uncertainty about tax rates and exemptions, there are still some things you can depend on:
- Charitable contributions (including additions to your Donor Advised Fund) are income tax deductible for people who itemize their tax returns. Depending on whether you contribute cash or stock you may be able to deduct up to 50% and 30% respectively, of your Adjusted Gross Income on this year’s return.
- Giving appreciated stock (held for more than a year) is especially advantageous, as your deduction is based on the value of the stock on the date of the gift and your pay no capital gain tax. This is a great way to lock in recent investment gains!
- Congress has approved an extension of last year’s IRA Charitable Transfer rule, which allows donors to give surplus IRA or qualified retirement plan assets (up to $100,000) directly to a charity without having to recognize the gift amount as income. Gifts to donor advised funds have never been eligible under this rule, but gifts to designated beneficiary funds or field of interest funds are permitted.
Here are a few tax-smart opportunities for charitable giving. Have you:
- sold your company?
- inherited a large sum?
- received a bonus?
- seen appreciation in your stock portfolio?
- earned a large income?
If so, you may want to ask your financial advisor, accountant, or attorney if setting up a donor advised fund or other charitable giving vehicle would be advantageous to you.
page updated 1/26/11